Price of Gold Fundamental Daily Forecast – Supported by Fiscal, Monetary Stimulus Expectations

Gold futures are trading higher shortly after the cash market opening on Thursday on the expectation of more stimulus from major central banks to limit the economic damage from the coronavirus pandemic, with most countries extending lockdowns to curtail its spread.

Gains are being limited by a stronger U.S. Dollar, which rose in reaction to dismal economic data from the Euro Zone. However, the greenback’s gains were also limited by increased demand for commodity-linked currencies in reaction to a rebound in crude oil prices.

At 12:26 GMT, June Comex gold futures are trading $1748.70, up $10.40 or +0.60%.

Opportunity Cost Becoming Attractive

The prospect of new central bank stimulus means the opportunity cost of holding bullion is becoming attractive. This is supportive for gold prices.

“You can print money but not gold, there are supply limitations,” said Bank of China International analyst Xiao Fu.

“There are a couple of central bank meetings coming up next week and they could unleash further money tree accommodation. Investors are looking for some asset class in the current situation that is relatively safe, Xiao Fu added.

More Widespread Stimulus Measures Expected

Gold tends to benefit from widespread stimulus measures from central banks since it is seen as a hedge against inflation and currency debasement.

Additionally, the U.S. House of Representatives expects to pass a nearly $500 billion coronavirus relief bill on Thursday but will put off any decision on changing its voting rules to avoid a potential partisan fight.

Meanwhile, European Union leaders will move on towards joint financing to a recovery after the COVID-19 pandemic by asking the European Commission to propose a fund sufficiently big for the job that targets the most affected sectors and regions.

US Economy Erases All Job Gains Since the Great Recession

On Thursday, the Labor Department reported that the number of Americans applying for state unemployment benefits totaled 4.427 million last week. Combined with the prior four jobless claims reports, the number of Americans who’ve filed for unemployment over the last five weeks is 26.45 million. That number exceeds the 22.442 million jobs added to payrolls since November 2009, when the U.S. economy began to add jobs back after the recession.

Daily Forecast

Gold held on to its gains after the U.S. jobless report. However, it did not make a new high for the session.

Traders are bullish gold and appear to be buying on the short-term dips that are the source of volatility. Meanwhile, the longer-term picture is a lot clearer with investors feeling there is more upside opportunity in gold than in the stock market.

Negative real rates and continued fiscal and monetary stimulus should provide another boost for the precious metal that is expected to hit $2000 over the near-term.