Fundamental Forecast for Gold: Neutral

Gold prices fell for the second consecutive week with the precious metal down more than 1.2% to trade at 1267 ahead of the New York closes on Friday. Bullion looks to close the month higher by nearly 1.4% as weakness in the greenback and renewed geo-political tensions fueled demand. The rally failed at key technical levels however and heading into the May open, prices may yet remain on the defensive.

The FOMC rate decision is on tap next week and although the central bank is widely expected to leave policy unchanged, traders will be looking for changes in the statement as Yellen & Co look to prep markets for upcoming adjustments to the benchmark interest rate. Improving labor market metrics (save last month’s off-beat miss) and a 2% read on 1Q Core PCE (Personal Consumption Expenditure) on Friday will continue to put pressure on the Fed to further normalize policy. As it stands, markets are pricing 1-2 additional hikes this year with Fed Fund Futures noting a 67% likelihood of a June hike. That said, for gold the emphasis will remain on the timing and scope of future rate increases. Remember that higher interest rates will tend to weigh on non-yielding assets such as gold.

Highlighting the data docket will be the release of April Non-Farm Payroll figures on Friday with consensus estimates calling for a print of 193K after last month’s disappointing read of just 98K. Unemployment is expected to uptick to 4.6% but we’ll be on the lookout for further improvement in the labor force participation rate to offset this. From a technical standpoint, the start of May trade finds prices continuing to slide after responding to key multi-year technical resistance earlier this month.