Comex Gold

Price of Gold Fundamental Daily Forecast – Weekly Gain Not Enough to Offset Monthly, Quarterly Losses

Gold futures closed slightly better on Friday after struggling most of the day following a nearly 2% gain the previous session. The market was underpinned by a drop in U.S. Treasury yields and a weaker U.S. Dollar. Fundamentally, worries about rising inflation and risks to economic growth offset expectations for the start of Fed tapering in November and a possible central bank rate hike in late 2022.

On Friday, December Comex gold futures settled at $1758.40, up $1.40 or +0.08%.

Gold finished up 0.38% for the week, but lower for the month and quarter.

Treasury Yields Fall Sharply to Start October

U.S. Treasury yields fell on Friday with the yield on the benchmark 10-year Treasury note down 6 basis points and the yield on the 30-year Treasury bond off by more than 5 basis points. That was enough to support gold prices for the session.

The 10-year rate topped 1.56% earlier in the week, its highest point since June, amid investor concerns about persistent inflation and tighter monetary policy. The news drove gold to its lowest level since August 10.

The yield has mostly bounced around below that level in the days since, allowing for a strong short-covering rally, but many Wall Street pros expect yields to rise in the months ahead.

Credit Suisse strategist Andrew Garthwaite, for example, said in a note to clients, “We continue to see 10-year breakeven inflation rising to 2.5% by year-end and 3% by end-2022. This pushes up bond yields to 1.8% on a 6-month view.”  Higher rates tend to be bearish for gold prices because it doesn’t pay any interest to hold. Money will seek the highest level of return.

Traders Show Little Reaction to US Economic Data

Inflation ran at a fresh 30-year high in August as supply chain disruptions and extraordinarily high demand fueled ongoing price pressures, the Commerce Department reported Friday.

The core personal consumption expenditures price index (PCE), which excludes food and energy costs and is the Federal Reserve’s preferred measure of inflation, increased 0.3% for the month and was up 3.6% from a year ago. The monthly gain was slightly higher than the 0.2% Dow Jones estimate and the annual forecast of 3.5%.

On a headline basis, PCE prices rose 0.4% for the month and 4.3% year over year, the highest since January 1991. That reflected a 24.9% increase in energy prices and a 2.8% rise in food.

In other news, the ISM Manufacturing Index for September registered a 61.1 reading, representing the percentage of companies seeing expansion. Anything above 50 represents growth; the Dow Jones estimate was 59.5.

Short-Term Outlook

The threat of tapering and a rate hike is likely to continue to underpin Treasury yields so we believe gold rallies will be capped over the mid to long-run. We also believe that short-term counter-trend rallies will become shorting opportunities.

However, we may not see the start of another leg lower until after the release of the U.S. Non-Farm Payrolls report on Friday, October 8. A disappointing report will send prices higher, while stronger data will trigger the start of another steep sell-off.

For a look at all of today’s economic events, check out our economic calendar.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.