Price of Gold Fundamental Daily Forecast – Surge in Euro Could Spike Gold Prices Higher

Gold inched up on Wednesday as the U.S. Dollar eased from a 6 ½ month high against a basket of currencies. The weaker U.S. Dollar helped drive up demand for the dollar-denominated gold market. The dollar was pressured by a recovery in the Euro as political tensions eased in Italy. However, gains were likely limited by a rebound in U.S. Treasury yields. Gold does not pay a dividend or interest so it tends to weaken in a rising interest rate environment.

August Comex Gold futures settled at $1306.50, up $2.40 or +0.18%.

Gold was also boosted by weaker-than-expected U.S. economic data. U.S. GDP slowed slightly more than initially thought in the first quarter as consumer spending rose at its weakest pace in nearly five years.

The Euro was helped on Wednesday by positive comments from Italian Prime Minister-designate Carlo Cottarelli, who said that possibilities had emerged “for the birth of a political government,” suggesting politicians, rather than technocrats like himself, might be able to steer the country out of deadlock.

The catalyst driving U.S. Treasury yields higher was stabilization of the European markets after a regular Italian bond auction proved better than feared. Political turmoil in Italy has rattled global financial markets in recent sessions, amid concerns over the prospect that snap elections in Rome could be framed as a de facto referendum on the country’s role in Europe.

In economic news, there were two major reports on Wednesday, the ADP Non-Farm Employment Change report, which is often used to gauge the strength or weakness of Friday’s U.S. Non-Farm Payrolls change, and Preliminary Gross Domestic Product.

According to the ADP Non-Farm Employment Change report, hiring decelerated in May with private employers adding 178,000 positions even amid signs of a tightening jobs market. Traders and economists were looking for an increase of 190,000. The April report was revised downward to 163,000, a decline of 41,000 from the original 204,000.

The Commerce Department reported on Wednesday that Gross Domestic Product increased by 2.2 percent annual rate in its second estimate of first-quarter GDP on Wednesday. This was lower than the previously reported 2.3 percent pace. The U.S. economy grew at a 2.9 percent rate in the fourth quarter.

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Forecast

Gold is trading higher early Thursday as the dollar continues to give up ground to the Euro.

At 0824 GMT, August Comex Gold is trading $1307.20, up $0.70 or +0.05%.

The market is still holding inside a key technical retracement zone at $1300.60 to $1315.60. We could see a $15.00 to $20.00 rally if $1315.60 is taken out with conviction.

In other news, traders are still watching the trade negotiations between the United States and China for any new developments. Earlier in the week, the White House slapped a 25% tariff on $50 billion worth of Chinese goods. Furthermore, the U.S. is poised to impose steel and aluminum tariffs on the European Union.

Traders will get the opportunity to respond to a slew of government reports on Thursday. Each could have an impact on Fed policy and interest rates especially the Core PCE Price Index that is expected to come in at 0.1%.

Also on tap is the Challenger Job Cuts report, followed by reports on Personal Spending, Personal Income and Weekly Unemployment Claims. Reports on Chicago PMI and Pending Home Sales are also scheduled.

Finally, FOMC Members Bostic and Brainard are scheduled to speak.

The reports that deal with inflation – Core PCE Price Index, Personal Spending and Personal Income – are the ones that can move the gold market.