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James Hyerczyk

Gold prices are down on Thursday following the release of the latest weekly U.S. jobless claims report that once again showed a slower pace of claims. Meanwhile, a firmer U.S. Dollar and weaker U.S. equity markets could be weighing on prices.

At 12:17 GMT, August Comex gold is trading $1724.00, down $11.60 or 0.67%.

Earlier in the session, gold prices rose as fears that new coronavirus cases could impede economic recovery bolstered demand for the precious metal and weighed on riskier assets.

Although at times, some consider gold a safe-haven asset, that label hasn’t been working for months as investors have tended to favor Treasurys, Japanese Yen and U.S. Dollar for protection during times of economic turmoil.

Since March, gold has been mostly influenced by fiscal and monetary stimulus. However, these moves may be good for the long-run with short-term traders more sensitive to the dollar, Treasury yields and demand for risk.

At this time, investors are being forced to deal with a number of offsetting factors, which are helping to put both a floor and a lid on prices.

On the bullish side, risks of a second wave of coronavirus infections have been underpinning prices as traders speculate on a slower recovery.

The imposition of travel curbs in Beijing to stop a new outbreak of coronavirus in the Chinese capital and surging new infections in several U.S. states have marred hopes of a swift global economic recovery, pressuring stock markets.

However, as demand for riskier assets falls, demand for the U.S. Dollar has risen, weighing on foreign demand for dollar-denominated gold. Furthermore, as stock markets weaken, investors are selling gold to raise cash to cover losses and to mean margin calls.

Essentially, these factors have helped generate a mostly sideways trade since April.

Daily Forecast

We have an overall upside bias because of the huge amount of stimulus from governments and central banks. However, at this time, we feel the market needs a strong catalyst to push prices over the top. This catalyst could be a second wave of coronavirus outbreaks.

Increasing infections should help to underpin prices, and may trigger another acceleration to the upside if governments start to impose restrictions and lockdowns in order to prevent the spread of infections.

The price action suggests investors are still weighing the evidence. Prices should rise sharply however, if the number of cases accelerate enough to affect key economic reports.

This week’s U.S. Jobless Claims report may have come in higher than the estimate, but the number is manageable. However, next week, we may see a jump in the number of claims if some parts of the country shut down again. This would be bullish for gold prices.

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