Price of Gold Fundamental Daily Forecast – Traders Showing Little Reaction to Weaker Dollar for Second Session

Gold futures are trading flat-to-slightly better on Tuesday, supported by a weaker U.S. Dollar, but capped by slightly better U.S. Treasury yields. Volume is light with many of the major players on the sidelines in preparation for Friday’s U.S. Non-Farm Payrolls report.

At 11:01 GMT, December Comex gold futures are trading $1815.10, up $2.80 or +0.15%.

Treasury Yields Inch Higher after Earlier Dip

Treasury yields are inching higher after touching their lowest level since August 23 earlier in the session. The choppy, two-sided trade is likely being fueled by uncertainty and position-squaring ahead of a key U.S. labor market report on Friday that could influence Fed policy.

The August non-farm payroll report is due to be released at 12:30 GMT on Friday. Economists polled by Dow Jones expect 750,000 jobs were created in August and the unemployment rate fell to 5.2%.

The Federal Reserve is monitoring the recovery in the labor market to gauge when it should tighten monetary policy.

Fed Chairman Jerome Powell indicated in a speech at the central bank’s annual Jackson Hole symposium on Friday that it would likely begin to taper bond purchases before the end of the year. However, Powell said interest rate hikes were not imminent as there was still “much ground to cover” before the economy hits full employment.

US Dollar Falls to 3-Week Low as Traders Await Tapering Clues

Helping to underpin gold was the weaker U.S. Dollar, which reached a three-week low against a basket of major currencies on Tuesday. Although the greenback has been on the back foot since Federal Reserve Chair Jerome Powell’s comments at the Jackson Hole conference on Friday, today’s weakness is also being fueled by a stronger Euro and British Pound.

Daily Forecast

Since the Fed’s decision on tightening will be data-reliant, investors will be watching for further improvements in data in the coming week, including consumer confidence on Tuesday and Wednesday’s release of Institute for Supply Management manufacturing data and ADP’s private sector payroll data, seen as a sort of preview for Friday’s government jobs report.

“Powell made clear on Friday that the Fed believes the ‘substantial further progress’ criteria has been met for inflation but not for employment and hence the jobs data will continue to be key for policy expectations,” analysts at MUFG said in a note.

Gold could continue to grind higher ahead of the jobs report, but I believe gains will be limited until traders get some clarity from the Fed. We may not get that until the September 21-22 monetary policy meeting.