Price of Gold Fundamental Daily Forecast – Prospect of Piecemeal Stimulus Providing Light Support

Gold futures are trading steady-to-higher after slipping the previous two sessions on Thursday and have nearly recaptured the psychological $1900 level as renewed hopes of more U.S. stimulus helped restore investor confidence.

At 09:51 GMT, December Comex gold is trading $1896.50, up $5.70 or +0.30%.

Focus Shifts Back to Stimulus Possibility

A delay in negotiations over a new U.S. coronavirus relief package has kept investor sentiment for the asset on hold this week. Meanwhile, the U.S. Dollar Index has weakened, as the focus changed towards a possibility of the stimulus plan.

After calling off the negotiations with the Democrats late Tuesday over further stimulus aid until the upcoming elections, President Donald Trump asked Congress to infuse $25 billion in new payroll assistance to U.S. passenger airlines in order to help tens of thousands of workers maintaining their jobs.

Even though Trump suggested he was open to piecemeal spending measures, top White House officials have played down the likelihood that anything gets passed, but House Speaker Nancy Pelosi is pursuing a standalone bill for aid to airlines.

Fed Minutes Show Concerns over Economy

Fed policymakers said on Wednesday their economic outlook assumed additional fiscal support and showed concerns over the economic recovery due to the lack of White House fiscal aid. Central bank officials believed that the U.S. economy’s most pressing need is for a new round of government spending and added that if aid packages are too small or too late, the economy will be in for a weak recovery. The news failed to move prices very much.

Daily Forecast

Renewed hopes for more U.S. stimulus is helping to keep bullion prices afloat on Thursday, but gains are being limited ahead of the weekly jobless claims data. The data could further gauge the health of the world’s largest economy. Traders are pricing in 820K new weekly claims, down slightly from last week’s 837K reading. However, continued claims are likely to remain above 10 million.

Ultimately, the direction of gold prices will be determined by the U.S. Dollar, but the dollar is being whip-sawed by the ever-changing stimulus picture. This is leading to the choppy trade in gold.

Clearly, gold needs both fiscal and monetary policy to come into play. The urgency is there to force policymakers and lawmakers to deliver more stimulus, but it looks like gold investors are going to have to be satisfied with pieces of fiscal stimulus instead of a major comprehensive spending bill.