Price of Gold Fundamental Daily Forecast – Traders Dumping Positions Amid Renewed Fed Tapering Talk

Gold futures are down more than 2% on Thursday after a pair of strong labor market reports drove U.S. Treasury yields and the U.S. Dollar higher, weakening demand for the dollar-denominated asset. The focus now shifts to key U.S. Non-Farm Payroll numbers due on Friday.

At 14:24 GMT, August Comex gold futures are trading $1873.80, down $37.10 or -1.94%.

Although gold may be supported at times over the short-run as bullish traders try to keep alive the elevated inflation story, over the mid- to long-term, gold could feel pressure on expectations that at some point the U.S. Federal Reserve will speak about tapering.

ADP Reports Biggest Private Payrolls Gain in Seven Months

U.S. private payrolls surged by the most in seven months in April as companies rushed to boost production amid a surge in demand, suggesting the economy gained further momentum early in the second quarter, powered by massive government aid and rising COVID-19 vaccinations.

Strengthening labor market conditions were reinforced by other data on Wednesday showing a measure of services industry employment increased last month by the most in more than 2-1/2 years. The reports bolstered expectations for another month of blockbuster employment growth in April.

Private payrolls by 742,000 jobs last month, the largest gain since last September, the ADP National Employment Report showed. Companies hired 565,000 workers in March. Economists polled by Reuters had forecast private payrolls would increase by 800,000 jobs in April.

Weekly Initial Claims Fall Below 400,000

The number of Americans filing new claims for unemployment benefits dropped below 400,000 last week for the first time since the COVID-19 pandemic started more than a year ago, pointing to strengthening labor market conditions.

Initial claims for state unemployment benefits fell 20,000 to a seasonally adjusted 385,000 for the week ended May 29. That was the lowest since mid-March 2020, when mandatory closures of nonessential businesses were enforced to slow the first wave of coronavirus infections. Economists polled by Reuters had forecast 390,000 applications for the latest week.

Short-Term Outlook

Thursday’s price action may be indicating that gold traders are now pricing in a bigger payrolls number than previously estimated in Friday’s report. Furthermore, consumers’ perceptions of the labor market are the strongest in 13 months.

According to a Reuters survey of economists, nonfarm payrolls likely increased by 671,000 jobs last month after rising by 266,000 in April.