Price of Gold Fundamental Daily Forecast – Traders Will React to Treasury Yields, Dollar – Don’t Trade the Headlines

Gold futures are edging lower early Friday with the news about the escalation of the U.S-China trade dispute, taking a backseat to the release of the U.S. Non-Farm Payrolls report at 1230 GMT.

At 0805 GMT, August Comex Gold is trading $1257.20, down $1.60 or 0.13%.

On Thursday, gold prices hit a two-week high, mostly in reaction to the ADP private sector jobs report that missed the estimate. However, the minutes from the Fed meeting in June may have also helped underpin gold prices.

Although the Fed said the economy was strong by most measures while suggesting it may soon announce the central bank’s rate-hiking cycle was advanced enough that policy was no longer boosting or constraining the economy. It other words, it was nearing neutrality.

The Fed also cautioned about allowing the economy to run too hot, thereby, allowing runaway inflation. To counter this possibility, policymakers remained locked-in on at least two more rate hikes this year.

Finally, the central bankers discussed whether recession lurked around the corner and expressed concerns global trade tensions could hit an economy that by most measures looked strong.

Forecast

With yesterday’s ADP report missing the estimate, triggering a positive response in gold, and the Fed saying that the escalating trade disputes between the U.S. and its major trading partners in China, the European Union, Canada and Mexico could cause slower economic growth, and hence, slow down the pace at which it raises interest rates, today’s U.S. Non-Farm Payrolls report takes on added importance. And this could influence gold prices especially to the upside.

Traders expect the headline number to come in at about 195K versus 223K last month. The unemployment rate is expected to remain steady at 3.8%. Average Hourly Earnings are expected to rise 0.3%.

Gold could rally today if the escalation of the trade dispute between the U.S. and China and a weaker-than-expected jobs report sends investors into the safe haven Treasurys. This would cause Treasury prices to rise and consequently, lower yields.

If yields fall then the dollar will become a less-desirable investment. If this occurs then foreign demand for dollar-denominated gold will increase, sending gold prices higher.

Don’t worry too much about the narrative, or stories, just watch Treasury yields then the U.S. Dollar. These two indicators will tell you more about where gold is going than the headlines.