Price of Gold Fundamental Daily Forecast – Strong Manufacturing PMI Could Accelerate Losses

I don’t expect a prolonged bear market to develop in gold, but I do think traders will shed positions until prices reach a value zone and the hedge and commodity funds rebuild long positions.
James Hyerczyk
U.S. Dollar and Gold

Gold is trading at its lowest level since July 17 shortly before the regular session opening on Thursday. The move is follow-through selling related to yesterday’s steep reversal to the downside. The weakness is being fueled by slightly higher Treasury yields and a stronger U.S. Dollar. The catalyst behind the move are comments from Federal Reserve Chairman Jerome Powell that tempered the chances of a series of rate cuts later this year.

At 10:47 GMT, December Comex gold futures are trading $1419.40, down $18.40 or -1.29%.

Fed Recap

On Wednesday, Federal Reserve policymakers cut its benchmark interest rates 25-basis points as expected, but Powell dampened any thoughts of more aggressive action when he characterized the rate cut as “a mid-cycle adjustment to policy”, a sign to markets that further sharp cuts were not imminent.

Going into yesterday’s session, gold traders had begun pricing in additional rate cuts for September and December.

In response to Powell’s comments, Treasury yields whipsawed before the 2-year Treasury note yield rose and the 10-year Treasury note fell. That was enough to send the U.S. Dollar Index to a two-year high. When the dollar rises, foreign demand for dollar-denominated gold tends to drop. This is driving the price action early Thursday.

Daily Forecast

The Fed has spoken and traders are adjusting their gold positions to reflect the central bank decisions. Investors will have about six weeks to figure out the Fed’s next move since it doesn’t meet until September 18.

From now until September 18, gold traders will be paying close attention to the economic reports to see if the economy is weakening enough to encourage the Fed to make another rate cut in September. Traders should be paying particular attention to “global developments” and “muted inflation” since they were mentioned in the Fed’s monetary policy statement.

Remember that Powell said, “It’s not the beginning of a long series of rate cuts.”  He didn’t say it’s just one rate cut.” So if the economy continues to show signs of weakness, or if global economic weakness begins to weigh on U.S. growth then the Fed is likely to cut again.

I don’t expect a prolonged bear market to develop in gold, but I do think traders will shed positions until prices reach a value zone and the hedge and commodity funds rebuild long positions.

On the data front, traders will get the opportunity to react to the latest data on weekly jobless claims at 12:30 GMT.

At 14:00 GMT, reports on Construction Spending and the most important ISM Manufacturing PMI will be released. It is expected to come in at 52.0, up from 51.7. A lower than expected reading could underpin gold prices.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US