Gold’s Price, a Fundamental Forecast

Gold’s Price, a Fundamental Forecast

$XAU, $GLD, $USD, $XAUUSD

Friday, Gold saw choppy trade. The price action suggests that traders have fully priced-in the latest round of global central bank rate cuts and are now waiting to see if those cuts are having an impact on the global economy.

The price action also indicates that gold may be fairly priced with investors unwilling to chase the market higher unless economic data continues to worsen and the central bankers are forced to make even more aggressive cuts in their benchmark rates.

At 18:31 GMT Friday, Dec Comex gold traded at $1517.10, down $8.40 or -0.55%.

Gold traded lower early in the session as US Treasury yields rose along with demand for risky assets, and USD firmed, making the dollar-denominated asset less-appealing.

However, gold turned positive Friday following the release of a weaker-than-expected US NFPs report at 12:30 GMT. The news put pressure on USD, while increasing appetite for the safe-have Yellow metal.

The US Labor Department’s monthly employment report showed job growth slowed more than expected in August, average hourly earnings came in higher than forecast

After the release of the report, Fed fund futures implied that traders saw a 96% chance for a 25 bpts rate cut from a current rate of 2.00-2.25% by the central bank this month.

Gold hit its high for the session and turned lower late in the session after Fed Chairman Powell said the central bank would “act as appropriate” to sustain an economic expansion that has been pressured by uncertainty over global trade.

Stocks moved higher on his comment, but yields held near their lows of the session. Nonetheless, gold felt pressure because Chairman Powell did not say anything new, or anything that that had not already been priced in the market.

Gold is likely to remain under pressure near-term until investors find value. Plus, the global economy is going to have to show signs of further deterioration, and the central banks are going to have to become more aggressive with their rate cuts in order to drive gold prices higher.

Have a terrific weekend.

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