Gold futures are inching higher shortly before the regular session opening after recovering from earlier weakness. A sharp rise in the U.S. Dollar Index fueled by weakness in the Euro drove gold prices lower, but the market turned positive after U.S. Treasury yields declined and demand for riskier assets weakened. The two-sided trade may have been fueled by below-average volume ahead of the long Easter holiday week-end.
At 10:58 GMT, June Comex gold is trading $1277.30, up $0.50 or +0.04%.
Gold has been under pressure this month as a string of positive economic news from both the United States and China have dampened concerns about global growth, limiting gold’s appeal as a safe-haven asset. Additionally, the two economic powerhouses have set a tentative timeline for the next round of trade talks and aim to conclude negotiations by early June, according to a Wall Street Journal report on Wednesday.
The catalyst behind today’s volatile price action is a report that showed the Euro Zone economy weakened further in April as an ongoing downturn in manufacturing began to take its toll on service providers, according to surveys of purchasing managers released earlier Thursday.
The weak signals from Europe are off-setting the positive vibes from the U.S.-China data, causing today’s early two-sided reaction.
According to IHS Markit, the composite Purchasing Managers Index, a measure of activity in manufacturing and services sectors based on a survey of 5,000 businesses-fell to 51.3 in April from 51.6 in March, reaching its lowest level in three months.
“The slowdown…showed further signs of engulfing the service sector,” said Chris Williamson, IHS Markit’s chief business economist.
Additionally, for the third straight month, the PMI for the manufacturing sector pointed to a decline in activity, although it rose slightly. In Germany, the Euro Zone’s manufacturing powerhouse, the measure was only marginally above the 80-month low plumbed in March.
Thin-trading conditions are contributing to today’s early two-sided trade. This price action is likely to continue throughout the session. Throughout the week, gold has been pressured by improving economic data in the U.S. and China. With the emergence of weaker data from the Euro Zone, traders now have to make position adjustments to reflect this. Because of this, we could see further short-covering today and a possible technical reversal to the upside.
This article was originally posted on FX Empire
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