Price of Gold Fundamental Daily Forecast – U.S. Jobs Report Expected to Have Little Impact on Gold Prices

Sellers continue to pressure gold prices early Friday on the strength of the U.S. Dollar. Gold is now trading at its lowest level in more than a year after taking out the July 19 bottom at $1221.00 the previous session. Given the current downside momentum, it’s not going to take much to put an $1100 handle on this market with the next major support coming in at about $1162.00.

At 0725 GMT, December Comex Gold is trading $1214.30, down $5.80 or -0.48%.

The current price action strongly suggests that hedge funds and money managers are increasing their net short bets on gold futures. However, we won’t know for sure until the Commodity Futures Trading Commission releases its latest data.

For the week, gold is down more than 1 percent and in a position to post its fourth straight weekly decline.

Forecast

Gold should remain under pressure as long as the U.S. Dollar continues to rise. Gold is a dollar-denominated asset so when the dollar goes up, foreign demand for gold goes down.

Longer-term, the dollar is being supported by expectations of rising interest rates in the United States. This week’s hawkish U.S. Federal Reserve monetary policy statement strongly supports the notion for at least two more rate hikes this year and possibly three more in 2019 before normalization takes place.

Short-term, the dollar is being driven higher by safe-haven buying tied to the escalation in trade tensions between the United States and China.

Earlier this week, President Trump proposed additional tariffs on China to force them to the negotiating table, but China vowed on Thursday to retaliate if the United States acted on the threat to raise tariffs on the Asian nation’s exports, fueling fears in financial markets that the trade war between the world’s two biggest economies would escalate.

Later today at 1230 GMT, the U.S. will release its latest Non-Farm Payrolls report. The Non-Farm Employment Change is expected to show an increase of 190K. The unemployment rate is expected to decline to 3.9% and Average Hourly Earnings are expected to come in at 0.3%, up from 0.2%.

I don’t expect the report to have much of an impact on gold prices unless the headline number and average hourly earnings completely miss the mark. If there is a reversal in gold prices, it will be fueled by short-covering and profit-taking. Given the current price action, I don’t expect to see a big buyer in gold at this time. There are just too many other places to invest at this time that actually make money.