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Gold Solid on Manufacturing

Tuesday, April 4, 2017

Today's Spotlight Market

Gold futures have held steady around the 1250-1265 range recently, despite the rebound in the US Dollar Index. The metal started the week on a strong note after New York Fed President William Dudley said it made sense for the central bank to raise interest rates at a gradual pace during the year. After the March rate increase, this was welcomed by Gold bulls concerned the Fed could move more aggressively than initially thought.

Fundamentals

Gold also got a boost from a solid month of March from the manufacturing sector. Factories in Europe and much of Asia, led by China, posted a strong month of growth. The official Chinese Purchasing Managers' Index (PMI) rose to 51.8 in March, up from 51.6. This is the strongest showing in the index since April 2012. In Europe, HIS Markit's PMI for the Eurozone rose to a 6-year high of 56.2 in March. Following the strong employment numbers in the US, manufacturing growth could pave the way for inflation to creep into the global economy. The major concerns for manufacturers at the moment are the Brexit and protectionist overtures from the Trump administration. British manufacturing did lose some momentum last month, as export orders grew more slowly and inflation took a toll on UK consumers' pocketbooks. The Trump administration has talked a tough game to this point regarding tariffs and other protectionist policies, but virtually no specifics are known. US job data will be released this week, which will traders something to mull over. ADP payroll data will be release on Wednesday and non-farm payrolls will come out on Friday morning.

Technical Notes

Turning to the chart, we see the June gold contract trading near resistance at the 1265 level . If Gold can clear this hurdle, prices may test the 1300 level on the upside. Failure to do so could result in further range-bound trading between 1200-1300. Currently, the RSI is showing overbought levels, which may put some pressure on prices.

Rob Kurzatkowski, Senior Commodity Analyst