Price of Gold Fundamental Daily Forecast – Sellers Return as Trade War Fears Ease, Focus Shifts to NFP Report
Gold is being pressured shortly before the U.S. opening by a recovery in the U.S. Dollar and stabilizing global equity markets. Gold is giving up earlier gains that were fueled by the threat of additional tariffs against China by the Trump administration.
At 0731 GMT, June Comex Gold is trading $1325.10, down $3.40 or 0.26%.
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Tariff Threat
Trump said in a statement on Thursday that further tariffs were being considered “in light of China’s unfair retaliation” against earlier U.S. trade actions that have triggered volatile responses in the global financial markets.
After Trump’s latest announcement, gold prices jumped as investors sought shelter in the safe haven asset amid weakness in the global equity markets and lower demand for the U.S. Dollar.
The renewed selling pressure in gold was strong enough to take out yesterday’s low and a main bottom at $1325.40. This was enough to change the trend to down on the daily chart.
The current price action is a combination of the reaction to increasing demand for risky assets, a firmer U.S. Dollar and the usual precautionary position adjustments ahead of the U.S. Non-Farm Payrolls report.
U.S. Non-Farm Payrolls Report
The Non-Farm Payrolls report due out at 1230 GMT is important because a substantial headline number, and wage growth could drive the U.S. Federal Reserve to act more quickly in raising interest rates. This would be bullish for the U.S. Dollar which would lead to lower demand for gold.
The NFP report is expected to show the U.S. economy added 188K new jobs in March. This is substantially lower than the previously reported 313K. Earlier in the week, ADP reported the private sector added 241K jobs last month so there may be some volatility in the NFP report number.
Average Hourly Earnings are expected to jump 0.3% versus the previously reported 0.1%. This number is important to the Fed because it indicates inflation. The higher the percentage change, the greater the chances the Fed will stick with its aggressive strategy to raise rates at least 2 more times this year.
Forecast
The direction of the gold market on Friday will be determined by whether investors decide to focus on the trade war or the non-farm payroll data. In my opinion, the NFP will have a short-term impact on gold with the direction of the Forex pair largely determined by investor demand of risky assets.