Fundamental Forecast for Gold: Neutral
Gold prices are down for the second consecutive week with the precious metal off more than 0.70% to trade at 1269 ahead of the New York close on Friday. The decline comes alongside losses in global equity markets this week as mounting geo-political tensions regarding a looming trade war continue to weigh on risk appetite. Interestingly, gold has not served as ‘safe haven’ for traders with prices still under pressure after last week’s outside weekly reversal.
Tariffs Stoke Trade War Concerns
The intensification of rhetoric between China and the U.S. has continued to weigh on market sentiment as investors weigh the impact of an all-out trade war between the world’s largest economies[1]. While these concerns would typically be supportive for the yellow metal, expectations for higher rates and persistent strength in the US Dollar[2] have kept prices under pressure with gold breaking to fresh yearly lows this week.
Things have been quiet on the data front but look for that to change next week with U.S. Durable Goods Orders and the third and final read on 1Q GDP on tap. Highlighting the economic docket will be the May read on Core PCE (personal consumption expenditure) on Friday. Consensus estimates are calling for an uptick in the Fed’s preferred inflationary gauge to 1.9% y/y. A strong print here would likely see traders continue to price in a fourth rate-hike from the central bank this year- a scenario that would weigh on gold prices.
As it stands, expectations are for a 25bps hike in September with December Fed Fund Futures hovering just under 50%. That said, there’s room for adjustment and strong US data will continue to fuel
