Price of Gold Fundamental Daily Forecast – Prices Firm on Weak U.S. Employment Data

The next major move in gold will be dictated by the direction of the U.S. Dollar. We never bought into the whole “safe-haven” buying theory especially after the stock market turned around on expectations of a Fed rate cut and gold kept going higher. Furthermore, gold traders are also locked in on the direction of U.S. Treasury yields.

Gold prices are trading higher on Friday, following the release of the U.S. Non-Farm Payrolls report. Earlier in the session, the market was being boosted by speculators betting on a weaker-than-expected number. And it looks like they got what they were looking for with the government reporting a non-farm payrolls increase of 75,000 in May, versus an 180,000 estimate.

In addition to the weaker than expected Non-Farm Employment Change for May, the previous report was revised lower to 224,000. Furthermore, Average Hourly Earnings came in below expectations at 0.2%. Traders were looking for a reading of 0.3%. The Unemployment Rate held steady at 3.6%.

At 12:35 GMT, gold hit a new high for the week on the news, taking out $1348.90 and moving ever so closely to the next main top at $1361.50.

Treasury yields are plunging on the news which should weaken demand for the U.S. Dollar. Furthermore, U.S. stock index futures gave back earlier gains and could turn lower for the session if the downside momentum continues.

According to financial market futures data, traders are now pricing in a summer reduction, likely in July, followed by another cut in September or October followed by a third in early 2020.

Lower interest rates are supportive for dollar-denominated gold because they tend to reduce the U.S. Dollar’s appeal as an investment.

The news is bullish for gold on paper, but keep in mind that the market is up over $30 this week and over $70 since May 21. In other words, traders may have already priced in the sooner-than-expected rate cut.