Gold Price Fundamental Daily Forecast – Solid ADP Jobs Data Pushes Gold Toward $1700 Level

Gold futures are lower for a fourth straight session as prices continue to edge closer to the psychological support level at $1700.00. And if that wasn’t bad enough, bullion is also on-track to post its fifth consecutive month of declines. This would match its longest streak of monthly losses since 2018.

The catalysts behind the selling pressure are expectations of more aggressive rate hikes than previously anticipated by a collection of central banks to combat red-hot inflation.

At 11:53 GMT, December Comex gold is trading $1726.50, down $9.80 or -0.56%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $160.53, up $0.02 or +0.01%.

Although gold has been pressured for months, this particular leg down is being fueled by Federal Reserve Chairman Jerome Powell’s hawkish tone last Friday that highlighted his determination to bring down inflation through tighter monetary policy.

His policy is expected to result in higher U.S. real rates and a stronger U.S. Dollar. Powell also warned that businesses and consumers are going to have endure “pain” during the process that could result in an economic slowdown or recession.

US Dollar Jumps on Euro Weakness Following Euro Zone Inflation Report

The U.S. Dollar rallied after the Euro fell below parity on Wednesday. The single-currency is in a position to post its third straight monthly loss as a burgeoning energy crisis added to recession fears, while the European Central Bank pushes ahead with possibly a series of aggressive rate hikes.

The Euro is surprisingly under pressure after a report showed inflation in the Euro Zone rose to another record in August, beating expectations and solidifying the case for further big European Central Bank (ECB) rate hikes.

The U.S. Dollar is expected to move higher against a basket of major currencies and especially the Euro even though a growing number of ECB officials have been calling for oversized rate hikes to combat surging inflation, which could exceed 10% in the coming months. This is because economists are certain the Euro Zone is heading into a recession because of an energy crisis and the U.S. economy may experience only a mild recession due to the strength of its labor market.

This should be of interest to gold traders because a stronger dollar tends to weigh on foreign demand for dollar-denominated bullion.

Daily Forecast

Gold could stabilize on an initial test of the $1700.00 area, but the consolidation shouldn’t last very long since more aggressive rate hikes are coming. Furthermore, the U.S. Dollar Index could be ripe for a decline heading into Friday’s U.S. Non-Farm Payrolls report as investors square positions.

A firmer Euro in anticipation of a super-sized rate hike by the ECB next week could also weaken the dollar index, at least temporarily. None of these factors are likely to control the direction of gold over the longer-term.

In economic news, today’s ADP Private Sector Employment report showed an increase of 132,000 jobs in August and annual pay at 7.6%. This may have missed the forecast, but gold fell to a new low for the session on the news.

The data suggests businesses may be hiring more conservatively as they try to figure out the economy’s conflicting signals. But the numbers are still strong enough to support a 75-basis point rate hike by the Fed at its policy meeting on September 20-21.