Price of Gold Fundamental Daily Forecast – Traders Squaring Positions Ahead of Friday’s NFP Report

Gold futures are edging higher on Thursday amid rising Treasury bonds and a slightly weaker U.S. Dollar. The limited price action suggests investors are positioning themselves ahead of the Friday’s U.S. Non-Farm Payrolls report, which could offer more cues on the Federal Reserve’s rate-hike stance.

At 07:28 GMT, December Comex gold futures are trading $1790.40, up $14.00 or +0.79%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $164.47, up $0.42 or +0.26%.

Gold prices could be subject to bouts of volatility over the near-term since the Federal Reserve doesn’t meet until September 21. In the meantime, traders are going to take their direction from economic reports and Fed member comments.

Some analysts are pointing to geopolitical tensions between China and the United States as another source of concern for gold traders. Although some will say that gold’s safe-haven appeal will make it an attractive asset should the situation escalate, most think that the U.S. Dollar will be the go to safe-haven, which should put pressure on dollar-denominated bullion.

It’s All About the Fed’s Next Move

The recent rally in gold was ignited by dovishly construed comments from Fed Chair Jerome Powell, but all he really implied was that the Fed could start to be flexible with the size of its future rate hikes. He didn’t say the Fed was going to stop raising rates, which the market interpreted to mean the next rate hike would be 50 basis points instead of 75 basis points.

That notion was supported last Thursday with the release of a negative GDP report and on Monday when manufacturing PMI came in below expectations. The odds of a 50bp rate hike rose and the chances of a 75bp rate hike fell, sending gold prices sharply higher.

The narrative started to change on Tuesday when three Fed officials said policymakers should keep raising rates until inflation drops down to the 2% mandate. They also warned that this could be painful to the jobs markets, but no one mentioned it would cause a recession.

On Wednesday, the idea for more rate hikes was supported by a stronger-than-expected non-manufacturing PMI report. This shifted the chances of a 50bp or a 75bp rate hike to 50/50. That means the market is sitting on the fence about the size of the next Fed rate hike.

It also suggests that traders have reduced the chances of a recession. Furthermore, it also implies that investors are waiting for more data before breaking the tie, and that data is Friday’s U.S. Non-Farm Payrolls report.

Short-Term Outlook

Before we look at the NFP report, traders will get the opportunity to react to the latest figures from the Challenger Job Cuts report, Weekly Unemployment Claims and U.S. Trade Balance. More importantly, FOMC Member Loretta Mester speaks. Earlier in the week, her hawkish comments helped sink gold prices so gold traders should pay attention to what she has to say at 16:00 GMT.

In Friday’s NFP report, traders will be watching for total jobs added and the unemployment rate. They could dip because the rate hikes are slowing the economy. But the Fed will be watching Average Hourly Wages because that is the inflation component of the report. If it’s perceived as too high then the Fed will get the greenlight to continue to raise aggressively. This could be bearish for gold prices.