Price of Gold Fundamental Daily Forecast – Soft Jobs Report Will Be Bullish for Gold

Gold futures are trading slightly lower early Friday as investors await the release of the May U.S. Non-Farm Payrolls report. Traders will be watching this report closely because it could determine the pace of future Fed rate hikes.

On Thursday, August Comex Gold futures settled at $1304.70, down $1.80 or -0.14%.

While concerns over the outcome of the jobs report may be limiting gains early Friday, the market is being supported by concerns over a possible global trade war. These worries were fueled on Thursday by the White House decision to impose tariffs on steel and aluminum imports from Canada, Mexico and the European Union.

According to reports, Canada and Mexico retaliated against the U.S. decision on Thursday, while the European Union stands ready to make its move.

In other news that affected the market earlier in the week, Italy’s anti-establishment parties revived coalition plans on Thursday, ending three months of political turmoil by announcing a government that promises to increase spending, challenge European Union fiscal rules and crack down on immigration.

Additionally, U.S. President Donald Trump on Thursday played down the chances of a quick deal in getting North Korea to abandon its nuclear arms as a delegation from Pyongyang headed to meet him with a letter from North Korean leader Kim Jong-un, suggesting a proposed summit may be back on.

In economic news, according to the Commerce Department, U.S. consumer spending increased more than anticipated in the month of April. Consumer spending jumped 0.6 percent last month. Economists were looking for a 0.4 percent increase.

Personal Income rose 0.3%, meeting expectations. The prior month was revised lower to 0.2%.

Personal consumption expenditures (PCE) price index excluding food and energy increased 0.2 percent for the third consecutive month. This moved the year-over-year increase to 1.8 percent.

Chicago PMI was an impressive 62.7, well above the 58.2 forecast. Pending Home Sales lost 1.3%, below the 0.4% estimate. The prior month was revised higher to 0.6%. Weekly Unemployment Claims fell to 221K, below the 228K forecast.

Forecast

Today’s U.S. Non-Farm Payrolls report could determine the pace of future Fed rate hikes later this year. The Non-Farm Employment Change calls for a gain of 189K jobs. The Unemployment Rate is expected to come in unchanged at 3.9%. The focus will be on Average Hourly Earnings which are expected to show a monthly rise of 0.2%.

U.S. Treasury yields could tumble if the average hourly earnings miss the estimate. This would be bullish for gold.

Another major report is the ISM Manufacturing PMI. It is expected to come in at 58.3, higher than the previously reported 57.3.

Minor reports include Final Manufacturing PMI, Construction Spending, ISM Manufacturing Prices and Total Vehicle Sales.

It comes down to U.S. Treasury yields at this time. Any report that suggests the Fed will raise rates at least 3 more times in 2018 will be bearish gold. Softer economic data will dampen the number of potential rate hikes. This could drive gold sharply higher.