Never miss a story from Ilya Spivak

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Ilya Spivak

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Gold

GOLD FUNDAMENTAL FORECAST: BEARISH

  • Gold prices idle as FOMC, US jobs data offer divergent drivers
  • US CPI, Powell commentary likely to scatter Fed stimulus hopes
  • Global slowdown fears may drive haven demand for US Dollar

Check out the latest US Dollar forecast and see what is expected to drive prices through mid-year!

Gold prices struggled for direction last week, torn between competing influences from the FOMC monetary policy announcement and April’s US jobs report. The former sent prices lower as Chair Powell signaled the central bank’s outlook is firmly set at “neutral”, pushing back against recently growing speculation about a rate cut on the horizon. The latter offered a mixed view of the labor market, allowing for a bounce.

While headline payrolls growth registered north of expectations, the jobless rate seemingly fell for the wrong reason as labor force participation shrank and wage inflation printed slower than analysts projected. The markets seemed to focus on the downbeat aspects of the data set, with gold rising as a parallel drop in bond yields and the US Dollar bolstered the relative appeal of non-interest-bearing and anti-fiat assets.

This selective reading probably reflects a built-in desire for retracement before the week-end. The FOMC produced a sizable down move and placed prices squarely at trend support. An unmistakable signal from the jobs data was likely needed to deliver a decisive breakout, especially just ahead of the weekly close. Without such conviction, a correction may have been the de facto default response.

GOLD MAY FALL ON US CPI, POWELL SPEECH, GLOBAL SLOWDOWN FEARS

As the new week begins however, it is the Fed that is likely to have offered prices the longer-lasting catalyst. Scheduled commentary from Mr Powell may reinforce the central bank’s dubious stance on easing. That might be reinforced by incoming CPI data. It is expected to show that the headline and core measures of inflation moved to 2.1 percent in April, putting them close enough to target for the FOMC to stand aside.

Meanwhile, external news-flow may stoke global slowdown fears. Monetary policy decisions from the RBA and the RBNZ are likely to strike a downbeat tone. Chinese PMI numbers may underscore sluggish performance in the world’s second-largest economy. Finally, the European Commission looks likely to downgrade official EU economic forecasts.

On balance, all this bodes well for the Dollar, and thereby threatens gold. Worries about a downshift in the business cycle might animate de-risking, and the greenback will have relatively little to keep it from capitalizing on haven flows if the Fed is thought to eschew stimulus (at least in the near term). A stronger Greenback is anathema to the yellow metal, a go-to alternative to paper currency.

--- Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivakon Twitter

US DOLLAR TRADING RESOURCES

Other Weekly Fundamental Forecast:

Australian Forecast: Australian Dollar Could Face First RBA Rate Cut Since August 2016

GBP Forecast: Sterling (GBP) Price Outlook: Brexit Anger May Dampen Sterling Strength