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Price of Gold Fundamental Weekly Forecast- NFP Report Main Price Driver, but North Korea Still a Major Concern

By:
James Hyerczyk
Updated: Oct 1, 2017, 07:27 UTC

Gold futures closed lower last week, pressured by rising Treasury yields, a stronger U.S. Dollar and increased demand for higher risk assets. Reduced

Gold

Gold futures closed lower last week, pressured by rising Treasury yields, a stronger U.S. Dollar and increased demand for higher risk assets. Reduced concerns over North Korea also weighed on demand for the precious metal as a safe haven asset.

December Comex Gold settled at $1284.80, down $12.70 or -0.98%.

Political uncertainty at the start of the week in Germany and New Zealand had no effect on gold prices suggesting investors were honed in on tightening monetary policy in the United States, the Euro Zone and the United Kingdom.

The biggest influence on gold prices last week were hawkish remarks from Fed Chair Janet Yellen. She sparked a spike higher in the dollar after she said the Fed needs to continue gradual rate hikes despite broad uncertainty about the path of inflation. She also acknowledged the Fed’s struggles to forecast one of its key policy objectives – 2 percent inflation.

The chances of a rate hike in December rose to 76 percent from just about 38 percent a month ago, according to CME Group’s FedWatch tool, after Yellen’s comments. The indicator settled at 71 percent at the end of the week.

Comex Gold
Weekly December Comex Gold

Forecast

The highlight this week and the primary price driver is likely to be Friday’s U.S. Non-Farm Payrolls report. According to early estimates, the Non-Farm Employment Change is expected to show the economy added 88K new jobs in September. This will be well below the previous 156K increase.

The Unemployment Rate is expected to remain at 4.4%. Average Hourly Earnings are expected to jump 0.3%, up from 0.1%.

Some traders will be glued to the employment change portion of the report, but the most important number will be Average Hourly Earnings. This is because it is a good inflation indicator and that’s what the Fed wants to see.

An overall solid NFP report should help boost the odds of a Fed rate hike before the end of the year. This should help boost Treasury yields and the U.S. Dollar while pressuring gold prices.

The ISM Manufacturing PMI report on Monday and the ISM Non-Manufacturing PMI report on Wednesday should also be watched closely. They are expected to come in at 57.9 and 55.5 respectively. Meeting or exceeding expectations should also weigh on gold prices.

Fed Chair Janet Yellen is also scheduled to speak late Wednesday. She could drive the price action like she did last week if she talks about Fed policy and the direction of interest rates.

Traders should continue to keep an eye on the North Korean situation. U.S. Secretary of State Rex Tillerson called Saturday for a calming of the situation on the Korean Peninsula, but said it was incumbent on North Korea to halt its missile launches.

“I think the most immediate action that we need is to calm things down,” Tillerson told reporters. “They’re a little overheated right now. And I think we need to calm them down first.”

“Obviously it would help if North Korea would stop firing off missiles. That would calm things down a lot,” Tillerson said.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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