Gold lacks direction but heavy week for US data lies ahead

Otmane El Rhazi from The Bullion Desk.

Gold edged lower on Monday morning although the precious metals complex appears to lack any real direction.

The spot gold price was last at $1,187.00/1,187.80 per ounce, down $2.50 on Friday’s close.

“Given the likelihood that the Fed stays on hold for longer and the continuing uncertainty over Greece, we would expect bullion prices to remain well supported, but they lack upward drive as investors still seem focused on equities,” FastMarkets analyst William Adams said.

Physical demand in the Asian markets is unexceptional and the dollar is stronger – it was last around 0.65 percent stronger at 1.0920 against the euro, nudging gold into negative territory.

But investors will scrutinise frontline data out of the US this week – ISM manufacturing and non-manufacturing surveys, April trade data and the blockbuster jobs report for May are due – for signs that the first-quarter slowdown spread into the second, which may unsettle currency markets.

“This week will be critical for assessing the strength of any rebound in US growth – and the outlook for Fed rate hikes later this year,” Barclays said in a note.

“[We] expect the data to show that the US economic activity rebounded in the second quarter. If not, market participants will likely push the expected start of Fed tightening further into the future,” the bank added.

On Friday, gold largely shrugged off the second estimate of US first-quarter GDP at -0.7 percent, slightly better than the -0.8 percent forecast but down significantly from 0.2 percent in the first reading. Revised University of Michigan consumer sentiment for May beat estimates at 90.7 but was the lowest reading since November. The Chicago PMI for May was at 46.2, much lower than the 53.1 forecast.

In European manufacturing PMIs today, the Spanish and Italian figures outperformed but the French and German readings undershot. The aggregated eurozone number of 52.2 missed the forecast 52.3.

Overnight, the Chinese manufacturing PMI was as expected at 50.2, while the non-manufacturing PMI was also around expectations at 53.2. The HSBC final manufacturing PMI was as forecast at 49.2.

Still to come today are the US final manufacturing PMI, ISM manufacturing PMI, personal spending, personal income and the core PCE price index figures.

Meanwhile, physical demand in Asian markets remains dull, offering scant support to international prices. Chinese buyers in particular remain on the sidelines despite the easing local price – Shanghai Gold Exchange volumes have been steadily reducing of late.

In India, the seasonally slower period for consumption has started in the lead-up to the all-important monsoon season.

In other metals, silver was last four cents lower at $16.66/16.71 per ounce, while platinum was close to its lowest in three months at $1,104/1,109, up $2. Palladium climbed $2 to $774/779.

(Editing by Mark Shaw)

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