The Daily Market Report: Gold Consolidates Within Range

03-Aug (USAGOLD) — Gold is trading modestly lower, with activity still well contained within the broad range established on July 20. Market focus has shifted to Friday’s nonfarm payrolls report for July.

Consensus for payrolls is running around +221k, which would be a slight decrease from the +223k seen in June. With the year-on-year trend for payrolls gains still negative, arguably there is still a chance that the labor market weakness factors into the timing of any rate hike this year. Certainly a miss of any significance would likely pull the plug on a September lift-off . . . if that plug hasn’t been pulled already.

U.S. economic data this morning was generally soft. Personal income for June slightly beat expectations, but May was revised lower. PCE came in at 0.2%, which was in line with expectations, but here too, May was revised lower. ISM for June was a miss, as was June construction spending.

Given the more dovish tone of last week’s FOMC statement, and the data out since, a September rate hike may well be off the table already. Treasury yields are perhaps reflecting that reality.

U.S. yields continue to retrace the gains seen since mid-winter. The yield on the 10-year note has fallen back to 2.15%, a level not seen since early-June. More than 38.2% of the rally since February has now been retraced.

Would the Fed even then consider a rate hike right before Christmas? That seems unlikely to me, but I’ve been pretty skeptical about a 2015 rate hike since Janet Yellen first suggested it might be appropriate.

If the prospects of a rate hike continue to diminish — and yields continue to drop — the dollar’s attempt to reestablish its uptrend may falter. If the greenback goes into retreat, gold may catch a bid.