Price of Gold Fundamental Daily Forecast – Needs to Hurdle $1370.50 With Conviction to Attract New Buyers

Gold futures finished slightly lower on Thursday, but still remained in a position to post its biggest weekly percentage gain in nearly two years. The catalyst behind the rally was a weaker U.S. Dollar and hedge buying against inflation. Traders also said that prices may have received a boost from physical buying ahead of the Chinese New Year.

April Comex gold settled at $1355.30, down $2.70 or -0.20%.

Gold was supported by fresh producer inflation news yesterday.

One day after the Labor Department said the consumer price index increased 0.5 percent in January, against forecasts of a 0.3 percent rise and the CPI was up 0.349 percent against estimates of 0.2 percent, the largest gain for the gauge since March 2005, the government reported that the Producer Price Index increased 0.4 percent last month, with core PPI – excluding volatile food and energy prices – also up 0.4 percent. The number was higher than the 0.2 percent estimate.

In other news, the number of Americans filing for unemployment came in at 230K, slightly above the 229K forecast, and higher than last week’s 45-year low.

The Empire State Manufacturing Index came in below expectations at 13.1. Traders were looking for a reading of 17.7. The Philly Fed Manufacturing Index, however, came in higher than the 21.5 estimate at 25.8.

Capacity Utilization came in slightly below the 78.0% estimate at 77.5%. Industrial Production was also below the forecast at -0.1%.

 Forecast

Gold prices are inching higher early Friday. At 1104 GMT, April futures are trading $1361.10, up $5.70 or +0.42%.

Stronger stock prices may be helping to cap gains, but the biggest influence is likely the weaker Euro and a rebound in the U.S. Dollar against a basket of currencies. U.S. Treasury yields are also flat.

Today, investors will get the opportunity to react to reports on housing starts, building permits, import prices and the Business Leaders Survey. This reports are due out at 1330 GMT.

At 1500 GMT, Consumer Sentiment and Quarterly Services Survey will be released.

I think today, investors will focus on the dollar, which has been beat up this week, and whether the stock market can continue its upside momentum on low volatility.

Trader reaction to the January 25 top at $1370.50 will also tell us if the buying is getting stronger, or if sellers have returned.