Price of Gold Fundamental Daily Forecast – Underpinned by Hopes of Fresh US Stimulus

Gold futures are edging higher early Friday, testing its highest level since April 24, underpinned by talks of further U.S. stimulus and worsening U.S.-China relations.

U.S. President Donald Trump is open to negotiations on another possible stimulus bill amid the pandemic, but not the one put forward by House of Representatives Democrats, a White House spokeswoman said.

Gold tends to benefit from widespread stimulus measures as it is often seen as a hedge against inflation and currency debasement. Stimulus floods the financial markets with dollars, weakening the currency and lowering interest rates while making gold a more attractive asset.

At 08:00 GMT, June Comex gold is trading $1746.70, up $5.80 or +0.33%.

Trump also signaled a further deterioration of his relationship with China over the virus, saying he has no interest in speaking to President Xi Jinping right now and going so far as to suggest he could even cut ties with Beijing.

White House Would Likely Support New Round of Stimulus Checks, Sources Say

The White House would likely support another round of stimulus checks, two senior administrative officials told CNBC on Thursday.

The White House did not provide further comment except to release a statement which said:

“As President Trump has said, we are going to ensure that we take care of all Americans so that we emerge from this challenge healthy, stronger, and with economic prosperity, which is why the White House is focused on pro-growth, middle class tax and regulatory relief.”

The House is set to vote on a $3 trillion stimulus bill on Friday to blunt the coronavirus pandemic’s devastating effects on the economy and health-care system.

Relations between Beijing and Washington Deteriorating

Relations between Beijing and Washington have deteriorated rapidly in recent months as Trump and other senior U.S. officials grow increasingly critical of China’s handling of the COVID-19 outbreak and threaten various punitive measures.

China’s foreign ministry said on Friday that steady Sino-U.S. bilateral relations serve the interests of both people, responding to U.S. President Donald Trump’s comments that he could cut ties with the world’s second-largest economy.

Foreign ministry spokesman Zhao Lijian told reporters during a daily briefing that the U.S. needs to cooperate with China in order to achieve stable relations, however.

Daily Forecast

On Friday, gold traders will get the opportunity to react to the latest U.S. Retail Sales data. Retail sales are expected to be down 12.3% in April, the largest decline since the data series began in 1992. The report is expected to show extreme weakness in apparel sales, a decline in gasoline sales, and poor auto sales. However, spending on food and beverage retailers and online purchases likely rose.

A worse than expected retail sales report will only help encourage the government to move its latest stimulus measures along more quickly.

“The economy’s recovery is very much dependent on the consumer, since this is the first recession ever led by the services sector. Consumers, in turn, depend on companies to keep most of those layoffs as temporary furloughs rather than layoffs,” wrote Patti Domm from CNBC.