Price of Gold Fundamental Daily Forecast – Higher as Safe-Haven Bond Buying Fuels Yield Plunge

Gold futures are edging higher on Friday amid a steep drop in U.S. Treasury yields, however, a steady U.S. Dollar and expectations of additional rate hikes by the U.S. Federal Reserve next week are helping to limit gains.  The price action in the Treasury and U.S. Dollar markets suggests investors are looking for protection on fears of recession.

At 12:41 GMT, December Comex gold futures are trading $1741.10, up $9.80 or +0.57%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $160.28, up $2.24 or +1.42%.

10-Year Yield Falls to Two-Week Low

U.S. Treasury yields retreated further on Friday as weak economic data and a significant interest rate hike from the European Central Bank (ECB) fueled concerns about an economic slowdown.

At 12:41 GMT, the yield on the benchmark 10-year Treasury Note was down sharply to 2.814. Earlier in the session, it fell to a more than two-week low of 2.8105%. This follows Thursday’s plunge, which was the worst single-day decline since March 2020. Meanwhile, the yield on the 30-year Treasury bond dropped to 3.003.

Weak Data, ECB Move Dampen Sentiment

Initial jobless claims rose last week to the highest in eight months, while a gauge of factory activity slumped in July, offering further indications that the U.S. economy is slowing as rising interest rates and high inflation weigh on spending power.

Risk sentiment was further dampened after the European Central Bank (ECB) on Thursday announced a 50-basis point hike to interest rates, above its own prior guidance and marketing its first hike in 11 years, as concerns about runaway inflation outweighed fears of slowing growth induced by Russia’s war in Ukraine.

Daily Forecast

Gold traders are currently responding to the drop in yields, but if the safe-haven bond-buying continues and demand for the U.S. Dollar increases, gold could have trouble holding on to its gains. If the short-covering rally continues, however, then December gold futures could extend the move into $1763.10, followed by $1798.50.

In economic news that could move the market, July’s initial flash PMI (purchasing manager’s index) readings are due at 13:45 GMT, offering a further glimpse at the health of the economy.