Price of Gold Fundamental Weekly Forecast – Another Weak Payrolls Number Will Be Bullish for Gold

Another miss to the downside by payrolls will likely be bullish for gold especially after the Commerce Department reported on Friday muted price pressures. A combination of weak inflation and job market will mean the Fed was right in calling off its rate hikes for the rest of the year, but investors may read this as a sign the economy is headed toward a recession which would be bullish for gold.
James Hyerczyk
Gold Bars and Dollar

After posting a solid gain on Monday, it was downhill all the way for gold prices with the market dropping sharply as concerns over a recession dissipated throughout the week. Gold started higher as speculative buyers bit on the news that a yield curve inversion would eventually lead to a recession later in the year.

For the week, June Comex gold settled at $1298.50, down $20.20 or -1.53%.

A plunge in Treasury yields did not drive investors into gold as expected instead they sought shelter in the U.S. Dollar, which drove down foreign demand for dollar-denominated gold. Perhaps throughout the week, gold investors realized that Treasury yields were not plunging in anticipation of a weakening U.S. economy, but likely because of demand for U.S. Treasury bonds due to negative interest rates in Europe and the strong possibility of interest rate cuts in Australia and New Zealand.

Throughout the week, the big story was the steep plunge in U.S. Treasury yields, however, gold traders seemed unfazed by the drop. Last week, the 10-year U.S. Treasury hit its lowest level since 2017 as investors worried about slowing economic growth. The previous week, the yield on the 10-year Treasury note fell below that of the 3-month bill for the first time since 2007. This inverted the yield curve which raised a red flag about a future recession.

In the U.S, Consumer Confidence came in at 124.1, well-below the 132.1 forecast. Final GDP also missed the 2.4% forecast, coming in at 2.2%. On Friday, gold was lifted a little by a dip in personal spending. U.S. consumer spending rebounded less than expected in January and incomes rose modestly in February, adding to concerns that slowing global growth was affecting the world’s largest economy as well. The Personal Consumption Expenditure index (PCE), the Federal Reserve’s preferred measure of inflation also showed muted price pressures.

Weekly Forecast

This week the price action in gold is likely to be influenced by a slew of major U.S. economic data including Retail Sales, ISM Manufacturing PMI and Durable Goods. However, the major market moving event this week is likely to be the U.S. Non-Farm Payrolls report, especially because of last month’s major miss to the downside.

Traders expect the March Non-Farm Employment Change to show the economy added 175,000 jobs, up from 20,000. Average Hourly Earnings are expected to come in at 0.2% and the Unemployment Rate is expected to hold steady at 3.8%.

Another miss to the downside by payrolls will likely be bullish for gold especially after the Commerce Department reported on Friday muted price pressures.

A combination of weak inflation and job market will mean the Fed was right in calling off its rate hikes for the rest of the year, but investors may read this as a sign the economy is headed toward a recession which would be bullish for gold.

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