Yahoo Finance Price of Gold Fundamental Weekly Forecast – Reaction to New Tariffs, 10-year Treasury Yield Key Market Drivers
Gold posted a volatile two-sided trade last week. Early in the week, a weaker U.S. Dollar drove the market higher due to increased demand for dollar-denominated assets. Gold was also supported by the news that the U.S. had extended an invitation to China to renew trade talks.
Weaker-than-expected U.S. Producer Inflation and Consumer Inflation reports also drove traders into gold, however, gains were limited by rising U.S. Treasury yields ahead of a widely expected Fed rate hike later this week.
Finally, gold gave back most of its gains on Friday due to upbeat U.S. retail sales and consumer confidence reports. A report that President Trump told his aides to proceed with tariffs on about $200 billion worth of Chinese imports also rattled investors.
For the week, December Comex Gold settled at $1201.10, up $0.70 or +0.06%.
Last Week’s Key News Events
On Wednesday, the government reported that U.S. producer prices unexpectedly fell in August, recording their first drop in 1-1/2 years. The Labor Department said its producer price index for final demand slipped 0.1 percent last month after being unchanged in July. August’s fall in the PPI was the first since February 2017. Economists were looking for an increase of 0.2 percent in August.
Core PPI gained 0.3 percent in July. In the 12 months through August, the core PPI increased 2.9 percent after rising 2.8 percent in July.
On Thursday, the government said U.S. consumer prices rose less than expected in August. The Labor Department said its Consumer Price Index increased 0.2 percent last month after a similar gain in July. In the 12 months through August, the CPI increased 2.7 percent, lowing from July’s 2.9 percent rise.
Core CPI edged up 0.1 percent. In the 12-months through August, the core CPI increased 2.2 percent after rising 2.4 percent in July.
Economists had forecast the CPI climbing 0.3 percent and the core CPI gaining 0.2 percent in August.
Also on Thursday, the Trump administration announced it had invited Chinese officials to restart trade talks.
On Friday after the U.S. Commerce Department said domestic retail sales rose 0.1 percent in August, the smallest gain in six months, but July figures were revised higher, supporting the view of solid consumer spending in the third quarter.
The news helped lift Treasury yields, with the 10-year yield touching 3 percent for the first time in six weeks. This helped make the U.S. Dollar a more attractive investment.
Forecast
Gold could start the week under pressure if reports from over the week-end are accurate. The Wall Street Journal reported Saturday, citing individuals familiar with the matter that President Trump is planning to impose a fresh round of tariffs targeting about $200 billion in Chinese goods.
According to the Journal, the tariffs are expected to be set at around 10%, according to people familiar with the matter, a lower level than the possibility of 25% tariffs previously floated by the administration.
With the move, Trump is trying to pressure Beijing ahead of planned high-level discussions and is intended to provide the U.S. leverage in talks over China’s alleged practice of demanding American companies turn over technology in order to do business in the country, the Journal reported.
However, traders could flock to the safety of the U.S. Dollar, putting pressure on gold prices, if the imposition of new tariffs escalates trade tensions between the U.S. and China.
There are no major U.S. economic reports this week but Treasury yields could continue to move anyway as investors position themselves ahead of the next Fed interest rate announcement on September 26. Last week, the benchmark 10-year Treasury note hit 3 percent, if it continues through this level, sellers could hit gold hard.
Minor reports include the Empire State Manufacturing Index, Building Permits, Housing Starts and the
This article was originally posted on FX Empire
