Price of Gold Fundamental Daily Forecast – Weak Equity Markets Setting Bullish Tone

Gold prices spiked to their highest level since June 20 early Thursday as stock market weakness and volatility drove investors into the traditional safe-haven markets like gold, Treasurys and the Japanese Yen. The drop in the stock market was triggered by an announcement from Apple which warned of lower first quarter revenue.

This news came on top of concerns over slowing global economic growth caused on Wednesday’s weak manufacturing data from China and the Euro Zone. Adding to investor concerns was the on-going partial government shutdown.

At 1131 GMT, February Comex gold is trading $1289.10, up $5.00 or +0.39%.

U.S. Stocks Plunge on Lower Q1 Guidance from Apple

After clawing back early losses on Wednesday to post a higher close, the major U.S. stock indexes are trading lower early Thursday. The catalyst behind the weakness is a letter to investors from CEO Tim Cook which announced lower Q1 guidance. Prior to the announcement, Apple stock was halted in after-hours trading. When trading resumed 20 minutes later, shares were down about 7 percent.

Forecast

Although gold has fallen about $5.00 from its intraday high, the trend is still up. Concerns will be raised about its strength, however, if the market turns lower for the session. Today marks the 12^th day up from the last main bottom so we could start to see some signs of profit-taking.

The tone of the market is being set by weaker stock prices. Continued weakness in the equity market should be supportive for gold. However, if stocks mount a dramatic recovery, sellers could hit gold prices hard.

Gold traders should also continue to pay close attention to the direction of the U.S. Dollar. However, this market too, will be impacted by the stock market. If stocks rally, Treasury yields could rise. This would make the dollar a more attractive investment and weaken demand for dollar-denominated gold.

Traders will be busy on Thursday with the U.S. releasing a slew of economic data.

At 1230 GMT, traders will get the opportunity to react to the Challenger Job Cuts report.

At 1315 GMT, look for a reaction to the ADP Non-Farm Employment Change report. It is expected to show the private sector of the economy added 179K jobs in December.

At 1330 GMT, Weekly Jobless Claims are expected to climb a little to 220K, up from 216K.

At 1500 GMT, the major ISM Manufacturing PMI is expected to drop to 57.7 from 59.3. This report could move the markets. Keep an eye on it. Stocks could plunge as well as the USD/JPY if this number comes in below the forecast. ISM Manufacturing Prices are expected to come in at 57.9, slightly below the 60.7 estimate.