Price of Gold Fundamental Daily Forecast – Sellers Return as Treasurys Firm Ahead of Friday’s NFP Report

Gold futures are trading lower on Monday after a second attempt to follow-through to the upside, following last Thursday’s nearly 2% gain, failed to attract enough new buyers to extend the move. Traders are blaming higher Treasury yields and a steady U.S. Dollar for the weakness in the non-yielding, dollar-denominated asset.

At 09:00 GMT, December Comex gold is trading $1751.40, down $7.00 or -0.40%.

Overall, helping to put a lid on gold prices are worries about Federal Reserve tapering, expected to begin in November, and a sooner-than-expected interest rate hike that could take place in late 2022. Reduced central bank stimulus and interest rate hikes tend to push government bond yields up, translating into a higher opportunity cost for holding gold that pays no interest.

Providing some support are lingering concerns over higher inflation and a slowdown in economic growth. Euro Zone inflation at a 13-year high in September and elevated price spikes in the United States are two factors gold bulls are centering on.

Gold bulls are also paying close attention to the surge in energy costs as this factor seems to be driving the higher inflation. Traders also continue to monitor the broader economic impact of Chinese property developer Evergrande’s debt crisis, which has some traders whispering the dreadful word “contagion”.

Volume is a little on the light side and some traders appear to be squaring positions ahead of Friday’s U.S. Non-Farm Payrolls (NFP) report that could set the tone in the market for the rest of the month. Traders are zeroing in on this report because the Federal Reserve has steered them to it by saying strong job growth will be necessary before the next rate hike.

Treasury Yields Rise Slightly to Start the First Full Trading Week of October

U.S. Treasury yields kicked off the first full trading week in October slightly higher. The yield on the benchmark 10-year Treasury note added less than a basis point, rising to 1.469%. The yield on the 30-year Treasury bond also climbed less than a basis point to 2.046%.

The 10-year U.S. Treasury yield hit 1.56% last week, its highest point since June, with investors concerned about inflationary pressures and tighter monetary policy.

US Dollar Posting Mixed Performance

The U.S. Dollar is trading mixed-to-lower on Monday as investors express caution by squaring positions ahead of Friday’s U.S. Non-Farm Payrolls report while dealing with renewed concerns about China’s property sector.

Shares in embattled developer China Evergrande were halted in Hong Kong without any immediate reason, rekindling market nerves about the possibility of global contagion – or at least distress in China’s property sector.

Investors are concerned that a collapse at Evergrande could hurt an already fragile Chinese economy and a drag on global growth.

Short-Term Forecast

Gold is going to have a hard time sustaining a rally as long as the threat of a November tapering by the Fed and a late 2022 interest rate are out there. Traders are more likely to sell rallies than buy strength.

Something is going to happen that encourages gold investors to buy strength with confidence. This week it could be the U.S. Non-Farm Payrolls report. Otherwise, we’re likely to see more buying on weakness. Unfortunately, the buying could keep occurring at lower and lower prices until enough buyers step in to change the main trend to up.

It’s hard to fight the Fed so gold is going to continue to struggle unless the Fed is forced to back away from its hawkish tone.