Price of Gold Fundamental Daily Forecast – Will Strong Employment Report Outweigh Global Economic Concerns?

Gold prices are trading higher on Friday in reaction to a drop in U.S. Treasury yields, weaker U.S. Dollar and lower demand for riskier assets. Lower Treasury yields tend to drive up demand for non-yielding gold. A weaker U.S. Dollar also tends to make dollar-denominated gold more attractive to foreign traders. A “risk-off” scenario also tends to drive up gold’s appeal as a safe-haven asset.

At 11:42 GMT, April Comex gold is trading $1293.90, up $7.80 or +0.61%.

The catalysts behind the buying are the worsening global economic outlook after the European Central Bank issued another warning about Euro Zone weakness and a new report from China showed imports and exports weakened last month.

Later today at 13:30 GMT, gold investors will get the opportunity to react to the February U.S. Non-Farm Payrolls report. A weaker-than-expected report could send prices sharply higher as this news would likely drive the Treasury yields and stock prices lower, weakening the dollar. A stronger-than-expected report could put a cap on gold’s earlier gains.

In the Euro Zone on Thursday, European Central Bank President Mario Draghi said the European economy was in “a period of continued weakness and pervasive uncertainty”. Conditions in the Euro Zone were perceived as so bad that the ECB:  pushed back the timing of its first post-crisis interest rate hike to 2020, cut its economic forecasts and launched a new round of cheap bank loans.

In China on Friday, dollar-denominated February exports fell 21 percent from a year earlier. This was the biggest drop in three years and far worse than analysts had expected. Imports also dropped 5.2 percent. So far, oil demand has remained steady, where imports of crude oil remained above 10 million barrels per day (bpd). However, an economic slowdown is likely to dent fuel demand and pressure prices at some point.

“Jobs growth is the single best indicator of how the economy is doing. It shows both how many people are being added to payrolls. It tells you much people are being paid, and also any job that is added is a sign of strength of a company’s order book and their prospects going forward,” said Luke Tilley, chief economist at Wilmington Trust.

That being said, today’s report is expected to show the economy to have added 180,000 jobs in February, and the unemployment rate is expected to drop by a tenth to 3.9 percent. Wage growth is expected to strengthen, rising 0.3 percent. In January, the economy added 304,000 jobs and wage growth rose 0.1 percent.