Price of Gold Fundamental Daily Forecast – Rangebound Unless New Data Confirms Economic Slowdown

Gold futures are trading higher on Friday after posting a dramatic reversal to the upside the previous session. It’s not the U.S. Dollar that is providing the support today, but a drop in Treasury yields and lower demand for risky assets. The dollar is actually trading better against a basket of currencies primarily due to a weaker Euro. If the U.S. Dollar were to fall sharply then this would give gold prices an additional burst to the upside.

At 07:53 GMT, April Comex gold is trading $1317.60, up $3.70 or +0.27%.

Optimism over U.S.-China trade relations took a backseat on Thursday following the release of a string of disappointing U.S. economic data. This reversed gold to the upside after it had touched its lowest level since January 28.

With the trade talks ending and investors waiting to see if a deal can be struck to end the trade dispute and prevent an escalation of U.S. tariffs on China after March 1. In the meantime, the focus may shift back to U.S. Federal Reserve policy and the strong possibility it will be forced to pause further rate hikes due to a slowing U.S. economy. It’s this type of news that can take gold to new higher price levels.

U.S. Economic Reports

December’s retail sales fell 1.2 percent, compared with an expected gain of 0.2 percent. This was their biggest drop in nine years.  Furthermore, weekly jobless claims registered an unexpected increase. The number of weekly claims rose 239K. This was higher than the 225K forecast.

Producer Inflation fell 0.1% versus a forecast of +0.1%. Core PPI, however, rose 0.3%, higher than the 0.2% forecast.

Core Retail Sales fell 1.8% versus a flat forecast. Business Inventories dropped 0.1%, better than the forecast for an increase of 0.3%.

Data Confusion

There is some confusion amongst gold investors because the weak retail numbers don’t mesh with the strong Non-Farm Payrolls numbers from earlier in the month. This could hold prices in a range until the issues are clarified by additional reports.

Daily Forecast

Gold is receiving additional support early Friday from China’s weaker-than-expected inflation reports. China reported Consumer Inflation at 1.7%, lower than the 1.9% forecast. Producer Inflation was up 0.1%, lower than the 0.3% forecast.

A series of U.S. reports could move gold prices on Friday. Weak numbers will increase the odds of a pause in Fed rate hikes. This would likely put pressure on the dollar while make dollar-denominated gold a more attractive investment.

The Empire State Manufacturing Index is expected to come in at 7.1, up from the previously reported 3.9. Import Prices are expected to come in at -0.1%, better than the previously reported -1.0%.

Capacity Utilization is expected to come in slightly better at 78.8%. Industrial Production is expected to rise 0.1%, down from the previously reported 0.3%. Preliminary University of Michigan Sentiment is expected to come in at 93.3. This is better than the previously reported 91.2.

If U.S.-China news is light then investors will continue to focus on the economic data. Weaker-than-expected data should underpin gold prices. Stronger-than-expected numbers will add to the economic confusion that has been capping gold prices since the release of the blowout U.S. Non-Farm Payrolls report on February 1.