Price of Gold Fundamental Daily Forecast – Weak NFP, PMI Data Could Spike Prices Higher

Gold is trading slightly lower early Friday after failing to follow-through to the upside following yesterday’s solid performance. Investors continue to digest the impact of the U.S. Federal Reserve’s 25-basis interest rate cut and its decision to pause on further rate cut. However, the biggest bullish influence on the market may have been Federal Reserve Chairman Jerome Powell’s statement that there would be no rate hikes until inflation rose significantly.

At 08:40 GMT, December Comex gold is trading $1516.00, up $1.20 or +0.08%.

Fed Chief Jerome Powell said Wednesday that the central bank would need to see a sustained and significant uptick in price pressures before considering future rate hikes.

“We just touched 2% core inflation to pick one measure. Just touched it for a few months and we’ve fallen back,” Powell said from Washington. “So I think we would need to see a really significant move up in inflation that’s persistent before we would consider raising rates to address inflation concerns.”

Powell stressed that any future move to increase borrowing costs would have to be preceded by a meaningful and consistent uptick in inflation, the rate at which prices rise in the U.S. economy. That could mean a long wait until the next hike, with the Fed’s preferred inflation gauge showing little signs of breaking out anytime soon.

Inflation was tame in September. Consumer prices as measured by the personal consumption expenditures (PCE) price index were unchanged for a second straight month in September as the cost of energy goods and services dropped 1.3%.

In the 12 months through September, the PCE price index increased 1.3% after rising 1.4% in the 12 months through August.

Excluding the volatile food and energy components, the PCE price index was also unchanged last month after gaining 0.1% in August. That lowered the annual increase in the so-called core PCE price index to 1.7% in September from 1.8% in August.

The core PCE Index is the Fed’s preferred inflation measure and had undershot the U.S. central bank’s 2% target this year.

Daily Forecast

It looks as if it is going to be a long-time before inflation is high enough to warrant a rate hike and this could be beneficial for gold buyers. It may not trigger a huge rally like another rate cut would, but not being able to raise rates is seen as a positive for gold traders.

Furthermore, considering the slowdown in the economy still exists, there are still many market participants who believe the Fed is not done cutting rates despite what it signaled on Wednesday.

On Thursday, the U.S. reported the number of Americans filing applications for unemployment benefits rose slightly more than expected last week. Later today at 12:30 GMT, gold traders will get the opportunity to react to the latest report on Non-Farm Payrolls and ISM Manufacturing PMI. Weaker than expected numbers could be bullish for gold because they may encourage the Fed to cut rates again over the short-run or at least sooner than expected.