Price of Gold Fundamental Daily Forecast – Pressured by Rising Treasury Yields, Steady Dollar
Gold futures are trading lower early Monday, pressured by a steady U.S. Dollar as investors continued to react to Friday’s solid U.S. jobs report and upbeat factory activity data. The news is helping to drive up U.S. Treasury yields as investors cut expectations on a rate cut later this year. Rising rates are helping to make the U.S. Dollar a more attractive investment.
At 02:38 GMT, April Comex gold futures are trading $1319.80, down $2.30 or -0.17%.
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On Friday, a Labor Department report showed U.S. Non-Farm Payrolls increased by 304,000, the most in almost a year. The median estimate in a Bloomberg survey called for an increase of 165,000. December’s number was revised lower from 312,000 to 222,000.
The Unemployment Rate increased to 4% from 3.9%. This slight rise was a reflection of the partial government shutdown, as the number of unemployed on temporary layoff rose by 175,000, many of them federal workers, according to the Labor Department.
Average hourly earnings showed a muted gain. They rose just 0.1% from the prior month, missing forecasts. The annual gain of 3.2% matched estimates though down from an upwardly revised 3.3% in December.
“The January PMI registered 56.6 percent, an increase of 2.3 percentage points from the December reading of 54.3 percent,” the ISM said in its latest Manufacturing Report on Business.
Essentially, the report showed U.S. production rebounded in January after a weak December, led by a sizable rise in new orders.
Daily Forecast
The strong domestic data highlighted the underlying strength in the U.S. economy despite uncertainty that prompted Fed Chairman Jerome Powell to say last week that “The case for raising rates has weakened somewhat.”
Currently, investors are pricing in zero rate hikes by the Fed in 2019, however, Friday’s solid reports have led investors to trim bets the Fed would need to cut interest rates to support the economy later this year.
Gold could feel pressure today as investors are likely to continue to adjust their positions in reaction to rising Treasury yields. Since gold doesn’t pay interest or a dividend, it tends to weaken when yields rise.
In other news, investors are keeping an eye on the political and economic turmoil in Venezuela as well as the aftermath of the trade talks between the U.S. and China.
The start of the Lunar New Year holiday in China could lead to a drop in demand, which would weigh on prices.
On Monday, investors will get the opportunity to react to the U.S. Factory Order report which is expected to have risen 0.3%.