Price of Gold Fundamental Daily Forecast – Traders Eyeing Yields, U.S. Dollar

Gold is expected to remain highly sensitive to the movement in Treasury yields and the U.S. Dollar on Friday. The data that could trigger a reaction in the markets is the U.S. Producer Price Index. PPI is expected to have risen 0.1% and Core PPI is forecast to have risen 0.2%.
James Hyerczyk
Comex Gold

Gold futures are trading flat shortly before the regular session opening as investors continue to try to determine whether to price in a 50-basis point rate cut by the Federal Reserve in late July. A 25-basis point rate cut has already been priced in. The price action has been pretty clear this week.

The market rallied on Wednesday when Fed Chair Jerome Powell’s surprisingly dovish tone drove up the chances of a half-a-point rate cut by the Fed at its July 30-31 monetary policy meeting. Prices reversed to the downside on Thursday after stronger-than-expected U.S. consumer inflation data dampened the chances of the larger rate cut.

At 09:55 GMT, August Comex gold is trading $1407.60, up $0.90 or +0.06%.

On Wednesday, Powell drove Treasury yields sharply lower and consequently the U.S. Dollar after he hinted at a potential rate cut later this month, citing unresolved trade tensions and worries over the weakness of the global outlook. The weaker dollar drove up demand for dollar-denominated gold.

“It appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook,” Powell said in prepared remarks.

Powell followed up on Thursday by saying that a rate cut is likely at the Fed’s next meeting as businesses slow investment due to trade disputes and a global growth slowdown. This was enough to underpin the market early in the session.

Gold prices turned south and finished lower after stronger-than-expected U.S. inflation data dampened the prospect of an aggressive Federal Reserve interest rate cut later this month.

Daily Forecast

Gold is expected to remain highly sensitive to the movement in Treasury yields and the U.S. Dollar on Friday. The data that could trigger a reaction in the markets is the U.S. Producer Price Index. PPI is expected to have risen 0.1% and Core PPI is forecast to have risen 0.2%.

Higher than expected numbers will further pressure the chances of a 50-basis point rate cut. This could support yields and the dollar, while weighing on gold prices. Lower-than-expected data will underpin gold, but not necessarily drive it through the recent tops.

U.S.-China trade relations is a wildcard today. On Thursday, President Trump said that China hasn’t followed through on its promise to by U.S. agricultural products. If this begins to anger Trump enough, he may order the U.S. to withdraw from the trade negotiations. This could be bullish for gold because it would raise concerns about the global economy and possibly put a 50-basis point rate cut back on the table.

 

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