Price of Gold Fundamental Daily Forecast – Underpinned by Retreating Government Bond Yields

Gold futures are trading higher on Thursday as U.S. Treasury yields fell following the release of robust U.S. retail sales data and better-than-expected news on initial jobless claims.

Retail sales exploded in March as stimulus checks hit the bank accounts of millions of Americans. Retail sales rose 9.8% for the month, the Commerce Department reported Thursday. That compared to the Dow Jones estimate of a 6.1% gain and a decline of 2.7% in February.

A separate report showed that first-time filings for unemployment insurance plunged, with the Labor Department reporting 576,000 new jobless claims for the week ended April 10. Economists polled by Dow Jones expected the government to report that another 710,000 filed claims for the first time during the week ended April 10.

At 13:00 GMT, June Comex gold futures are trading $1747.30, up $11.00 or +0.63%.

It’s Not the Numbers, It’s Lower Yields

Gold is rallying because U.S. Treasury yields are trading lower on Thursday morning, despite strong weekly jobless claims and booming monthly retail sales data.

The gold bugs are pushing the notion that the stronger economy (i.e. inflation) is driving gold higher, but that’s wrong. For months, professionals have been driving bond yields higher because they believed the economy would heat up enough to cause a large enough surge in inflation to force the Fed to abandon policy and start raising interest rates.

Gold prices were getting crushed as yields rose. However, the Fed has finally convinced traders that the jump in inflation will be transitory and that policymakers will not be raising rates anytime soon.

Government bond yields are falling from the multi-month highs because of this, and those traders who shorted gold are now buying it back.

Gold is currently trading inside a major retracement zone at $1718.40 to $1788.50 which represents 50% to 61.8% of its 52-week range.

We could be headed to a short-term test of $1788.50 but it’s going to be hard to sustain a rally over this price.

For a look at all of today’s economic events, check out our economic calendar.