Price of Gold Fundamental Daily Forecast – Thin Holiday Trade, Weak Initial Claims Fueling Short-Covering

Gold futures are up for a second session on Thursday as a dip in U.S. Treasury yields and the U.S. Dollar encouraged some gold shorts to cover their positions ahead of the Good Friday holiday. Trading conditions are relatively thin with many professional traders moving to the sidelines

For a little over a year, the direction of gold prices have been driven essentially by two events, the start of the pandemic in March 2020 and the announcement of the vaccines in November 2020. Since yesterday’s rally corresponded with the announcement of President Joe Biden’s massive infrastructure plan, we will be monitoring events to see if a correlation develops.

Gold traders have to start realizing that although the infrastructure plan is a form of stimulus, it is not the same as handing $1400 paychecks to Americans, and so the gold market may react differently at least over the short-run when we begin to find out how much support Biden actually has for his programs.

At 13:02 GMT, June Comex gold futures are trading $1724.00, up $8.40 or +0.49%.

US Economic Data Will Start to Carry More Weight

As the economy recovers, U.S. economic reports are going to carry more weight. Consequently, gold will become more sensitive to these reports. As long as Treasury yields and the U.S. Dollar continue to rise, gold’s gains are going to be capped, but that doesn’t rule out the possibility of some good-sized counter-trend rallies.

On Wednesday, payroll processing firm ADP reported that private payrolls in March expanded at the fastest pace since September as anticipation of a strong economic rebound coupled with aggressive vaccination rates pushed companies to hire.

On Thursday, first-time claims for jobless benefits were higher than expected last week, with 719,000 more workers heading to the unemployment line, the Labor Department reported Thursday.

The total compared with the 675,000 estimate from Dow Jones and was above last week’s downwardly revised 658,000.

Daily Forecast

Traders are going to have to do more work before I’ll recognize a major bottom in gold. Remember that following a prolonged move down in terms of price and time, the first rally is usually short-covering. Then there is a pullback or a test of the recent low. If this market is going to move higher then real buyers will have to come in on this pullback. At this time, it’s too early to tell if the market has started the bottoming process.