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Price of Gold Fundamental Daily Forecast – Stronger US Manufacturing Data Weighing on Gold Prices

James Hyerczyk
The stronger than expected Empire State report is probably going to reduce the chances of a 50-basis point rate hike and this should be supportive for Treasury yields and the U.S. Dollar, while pressuring gold prices.

Gold futures are trading higher shortly after the regular session opening, but giving back most of its earlier gains. Volume is light for a second straight session as investors try to determine whether the Fed will cut rates aggressively at its monetary policy meeting at the end of July.

Bullish traders have already priced in a 25-basis point rate cut, but are still trying to determine whether a more aggressive 50-basis point rate cut is possible. The chances of a half-a-point rate cut at the end of the week was 30 percent.

At 13:26 GMT, August Comex gold is trading $1413.20, down $1.00 or -0.06%.

Mixed Chinese economic data is helping to hold gold in a range. However, stronger demand for higher risk assets, firmer U.S. Treasury yields and a stronger U.S. Dollar are beginning to weigh on demand for dollar-denominated gold.

In China, economic growth slowed to its weakest in about 27 years. Second-quarter annual GDP fell to 6.2% as expected, but its quarterly growth reading of 1.6% beat forecasts. June reports on industrial production, retails sales and fixed asset investment were above trader expectations.

In the United States, the New York Federal Reserve said on Monday its gauge of manufacturing growth in New York recorded its biggest increase in more than two years in July, returning to positive territory to suggest regional activity was expanding again.

“Manufacturing firms in New York State reported that business activity grew modestly in July,” the New York Fed said of the latest figures.

The regional Fed’s “Empire State” index on current business conditions jumped to 4.3 points this month from -8.6 in June, which had been the first negative reading since October 2016. Traders were looking for a reading of 2.0.

Daily Forecast

The stronger than expected Empire State report is probably going to reduce the chances of a 50-basis point rate hike and this should be supportive for Treasury yields and the U.S. Dollar, while pressuring gold prices.

The daily chart indicates that the direction of the August Comex gold market today is likely to be determined by trader reaction to the short-term pivot at $1413.80.

This article was originally posted on FX Empire

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