Gold futures finished lower last week, ending a six-week winning streak. The selling pressure was primarily driven by a surge in U.S. Treasury yields, which made the U.S. Dollar a more attractive investment. A stronger U.S. Dollar tends to lead to lower foreign demand for dollar-denominated gold, leading to weaker prices.

Last week, August Comex gold futures settled at $1400.10, down $13.60 or -0.96%.

On Friday gold plunged 1.46% while the benchmark 10-year Treasury note surged back above 2% after the government’s monthly jobs report showed much stronger-than-expected employment growth in June than anticipated. The drove the U.S. Dollar to a two-week high against a basket of currencies.

According to the U.S. Labor Department, payroll growth rebounded sharply in June as the U.S. economy added 224,000 jobs, countering recent worries that the labor market and overall growth picture are weakening. Economists were looking for the economy to add 162,000 jobs in June after May’s initial anemic print of 75,000.

Additionally, the unemployment rate inched up to 3.7%. The closely watch inflation indicator, average hourly earnings, fell short of its estimate, rising 0.2% on a monthly basis versus 0.3% growth expected. Annually, wages were up 3.1%.

Weekly Forecast

Once again, Treasury yields, the U.S. Dollar and demand for risk will likely influence the direction of gold prices this week.

The catalysts behind the movement will be U.S. inflation data with a speech and Congressional testimony by Federal Reserve Chairman Jerome Powell exerting the greatest influence on the price action.

On Thursday, U.S. Consumer Inflation is expected to come in flat. Core U.S. Consumer Inflation is expected to come in at 0.2%. Friday’s Producer Inflation report is estimated to have risen 0.1%.

Fed Chair Powell speaks on Tuesday, and testifies before Congress on Wednesday and Thursday.

Weak inflation data will support the case for a rate cut. This will also underpin gold prices.

Powell has the opportunity to reinforce gold trader expectations for a July 31 rate cut, or reduce demand for the precious metal by reiterating his previous comments about the Fed being “patient” and “data dependent”.

It all comes down to whether Federal Reserve policymakers feel the need to buy “insurance” against future economic weakness and to sustain the expansion.