Price of Gold Fundamental Daily Forecast – Near-Zero Rates Fueling Slow, Steady Demand

Gold futures are trading higher on Friday, putting it in a position to post a second straight week of gains on a weaker U.S. Dollar as fragile U.S. jobs data dented hopes of an economic recovery. Meanwhile, the dollar is on track for a weekly decline against a basket of major currencies, making gold more attractive for foreign investors.

At 09:36 GMT, December Comex gold is trading $1962.80, up $12.90 or +0.66%.

US Economic News

The number of Americans filing new claims for unemployment benefits fell less than expected last week and applications for the prior period were revised up, suggesting the labor market recovery had shifted into low gear amid fading fiscal stimulus.

But jobless claims remained elevated at 860,000, while both housing starts and the Philadelphia Fed business index fell and trading marked a risk-off sentiment.

The Philly Fed came in at 15, matching the forecast, but coming in below the previously reported 17.2. U

Weekly Unemployment Claims were reported at 860K, higher than the 825K estimate, but lower than last week’s upwardly revised 893K.

Building Permits were 1.47 million units, lower than the 1.51m forecast and previously reported 1.48m.

Housing Starts showed a 1.42 million unit increase, missing the 1.47m forecast and 1.49m previous number.

Near Zero Rates Globally Keep Central Banks at Forefront

Near-zero Interest rates globally and demand for hedge protection against perceived inflation have helped gold surge nearly 29% so far this year.

Continuing the trend, the U.S. Federal Reserve on Wednesday vowed to keep interest rates near zero for a long time.

On Thursday, the Bank of England said it was considering negative interest rates, while the Bank of Japan signaled readiness to ramp up stimulus.

Short-Term Outlook

Slow and steady demand is helping to boost gold prices this week. This may not please the short-term speculators but it complies with the longer-term outlook for lower interest rates for several more years.

Gold prices should remain supported over the near-term especially heading into the November elections, but gains could be limited by extreme stock market weakness if gold investors are forced to sell positions to cover losses.

The price action suggests we’re not likely to see a huge short-term price spike until the U.S. Congress passes a stimulus package. However, there are no signs of that taking place over the short-run as Republicans and Democrats remain miles apart.

For a look at all of today’s economic events, check out our economic calendar.