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Price of gold fundamental daily forecast - strong manufacturing PMI data could sink prices

Commentaries & Views

The direction by gold is likely to be determined by today’s Flash Manufacturing PMI number.

Comex Gold

Traders are saying that gold’s weakness on Thursday is being attributed to hopes of a quick global economic recovery, putting a dent in the bullion’s appeal as a safe-haven asset. Gold traders are also monitoring the movement of the U.S. Dollar, which is trading mixed against a basket of major currencies, U.S. Treasury yields and demand for higher-yielding assets like stocks.

At 11:41 GMT, June Comex gold is trading $1738.00, down $14.10 or -0.80%.

Short-term, the focus will be on today’s U.S. Jobless Claims report due at 12:30 GMT. It is expected to offer further clues about the health of the world’s top economy. The report is expected to show that another 2.4 million workers filed for compensation.

The Flash Manufacturing PMI, due to be released at 13:45 GMT, is the major report of the day. It is expected to come in at 39.3, up from the previously reported 36.1. A stronger than expected number could sink gold prices. A weaker than expected number should be supportive for gold prices.

Additional data includes, the Philly Fed Manufacturing IndexFlash Services PMI, CB Leading Index and Existing Home Sales.

FOMC Member Williams is expected to give a speech at 14:00, while Fed Chair Powell will speak at 18:30 GMT.

Longer-term, gold continues to be supported by inflation risk due to the tremendous amount of stimulus injected into the economy by the government and Federal Reserve. Additional support is being provided by recession fears and simmering U.S.-China trade relations.

Earlier in the week, U.S. Federal Reserve policymakers acknowledged the possibility of further support measures if the economic downturn persists, the minutes from their latest policy meeting showed.

Daily Forecast

The direction by gold is likely to be determined by today’s Flash Manufacturing PMI number. A stronger number will be an early sign the economy has stabilized. This would encourage gold investors to book some profits and lighten up on their bullish positions.

Although gold could break sharply with $1782.40 a possible technical target, the news and subsequent move will not mean the trend has changed to down, but rather it is overpriced.

A weaker Flash Manufacturing PMI number should provide some support, but not likely enough to take out this week’s high at $1775.80.

Traders should also continue to monitor the coronavirus numbers after the World Health Organization (WHO) reported a big jump in the number of new cases on Wednesday. Signs of a second wave of the virus will also be bullish for gold.

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