Price of Gold Fundamental Daily Forecast – Supported by Safe Haven Buying, Weaker Dollar

Gold futures bounced back from a two-week low to close higher on Thursday despite U.S. data showing a faster-than-forecast increase in domestic consumer prices in August.

December Comex Gold futures settled at $1329.30, up $1.30 or +0.10%.

The precious metal was also supported by the news that the Chinese bitcoin exchange BTCChina’s announcement that it would stop all trading from September 30. This could create an asset allocation shift back into more traditional safety plays in the gold market.

The price action in gold was primarily driven by the movement in the U.S. Dollar, which closed lower against a basket of major currencies on Thursday after an upbeat report on U.S. consumer inflation failed to impress investors.

U.S. consumer inflation accelerated in August amid a jump in the cost of gasoline and rents. According to the U.S. Labor Department, the Consumer Price Index rose 0.4 percent last month after edging up 0.1 percent in July. August’s gain was the largest in seven months and lifted the year-on-year increase in the CPI to 1.9 percent from 1.7 percent in July.

Economists and traders had forecast the CPI rising 0.3 percent in August and climbing 1.8 percent year-on-year.

The biggest influence on the CPI was gasoline prices which surged 6.3 percent, the biggest gain since January, after being unchanged in July.

The Core CPI report, which strips out the volatile food and energy components, increased 0.2 percent in August. That followed four straight monthly increases of 0.1 percent. In the 12 months through August, the Core CPI increased 1.7 percent.

In other news, Weekly Unemployment Claims declined 14,000 to a seasonally adjusted 284,000 for the week-ended September 9. This came as a surprise because it was expected to rise in further reaction to the impact of Hurricane Harvey on the Texas Gulf Coast region.

Forecast

December Comex Gold futures are trading higher early Friday, but giving back some of its earlier gains. Gold rose after North Korea fired another missile over Japan, triggering a fresh round of safe-haven buying. Investors drove the U.S. Dollar lower while seeking shelter in gold, the Japanese Yen and U.S. Treasurys.

North Korea fired a missile on Friday that flew over northern Japan, far out into the Pacific Ocean, South Korean and Japanese officials said, further increasing tensions after Pyongyang’s recent test of a power nuclear bomb.

There has been no major response from the U.S., Japan or South Korea, other than to ask for tougher sanctions against the rogue nation of North Korea. This is probably why gold is backing down from its highs.

In other news, on Friday, investors will get the opportunity to react to the latest data on U.S. Retail Sales. Core Retail Sales are expected to come in at 0.5% and Retail Sales are expected to rise only 0.1%.

Additionally, look for the Empire State Manufacturing Index to come in at 18.2, lower than the previous 25.2. The Capacity Utilization Rate is expected to come in nearly unchanged from the previous month at 76.8%.

Look for Industrial Production to rise 0.1%. Preliminary University of Michigan Consumer Sentiment should come in at 95.1, down from the previous 96.8. Business Inventories should rise 0.2%, below the previous 0.5%.

I don’t expect the reports to have much of an impact on gold prices until the Retail Sales data blows away the forecast in either direction. Gold will be largely influenced by the direction of U.S. Treasury yields, the U.S. Dollar and equity prices.