Price of Gold Fundamental Daily Forecast – Supported by Fresh ECB Stimulus, US Initial Claims Jump

Gold futures are trading higher after the U.S. Dollar weakened against a basket of major currencies in response to a stronger Euro. Gold was also supported by a jump in jobless claims which rose more than expected, putting more pressure on U.S. lawmakers to pass a new stimulus bill.

The single-currency rallied after the European Central Bank (ECB) announced more stimulus measures, including the increase and expansion of its debt purchase scheme, on Thursday to help the regions economy cope with the second wave of the coronavirus pandemic.

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The weaker dollar drove up demand for dollar-denominated gold.

At 13:55 GMT, February Comex gold is trading $1847.90, up $9.40 or +0.51%.

Gold benefits from its appeal as a hedge against inflation that could result from the unprecedented stimulus unleashed in 2020.

ECB Rolls Out More Stimulus Measures

The ECB rolled out yet more stimulus measures on Thursday to lift the currency bloc out of a double-dip recession and provide support to the economy while its 350 million people wait for coronavirus vaccines to be deployed.

In keeping with its promise to maintain support for the economy during the pandemic, the ECB expanded its debt purchase scheme and agreed to provide banks with even more ultra-cheap liquidity as long as they keep passing the cash onto companies.

“Uncertainty remains high, including with regard to the dynamics of the pandemic and the timing of vaccine roll-outs,” the ECB said in a statement. “The Governing Council therefore continues to stand ready to adjust all of its instruments, as appropriate.”

The ECB increased the overall size of its Pandemic Emergency Purchase Programme by 500 billion Euros to 1.85 trillion Euros, in line with market expectations. It also extended the scheme by 9 months to March 2022, with the aim of keeping government and corporate borrowing costs at record lows.

The ECB also extended the period during which banks will get a 1% interest rate from the central bank for borrowing at its long-term cash auctions by one-year to June 2022.

[fx-article-ad]Jobless Claims Rise More Than Expected After Break from Holiday

The pace of weekly jobless claims jumped last week after filings caught up with a decline due in part to the Thanksgiving holiday.

First-time claims for unemployment insurance totaled 853,000, an increase from the upwardly revised 716,000 total a week before, the Labor Department reported Thursday. Economists surveyed by Dow Jones had been expecting 730,000.

This was the highest weekly total since September 19 and reflects the job markets struggles lately as coronavirus cases have spiked and local and state governments have imposed restrictions on some activities.

Continuing claims increased by 230,000 to 5.76 million, the first time that number has gone up since late August.

Daily Forecast

The initial claims report is another piece of bad labor market data that could drive up the urgency to pass another stimulus package. Right now, the negotiations between Democrats and Republicans have stalled, disappointing gold traders. This could cap any gains in the gold market.

Traders holding out hope of a fiscal stimulus package over the short-run are likely to provide support especially if the market drops to the short-term value area at $1823.50 to $1810.20.

But with both sides still far apart on an agreement, it will be hard for gold to breakout to the upside. Therefore, were looking for a rangebound trade over the near-term with prices bounded by support at $1810.20 and resistance at $1894.60.

For a look at all of todays economic events, check out our economic calendar.