Gold Steady Ahead of US Manufacturing PMI

Gold is steady on Tuesday, as the metal trades at a spot price of $1068.94 in the European session. In economic news, we’ll get a look at US manufacturing data, highlighted by ISM Manufacturing PMI. The markets are expecting a forecast of 50.6 points.

Gold continues to struggle, as the base metal trades at its lowest level since February 2010. November was a brutal month for the metal, which gave up about 7 percent of its value. With the markets eyeing a rate hike in December, and the US dollar continuing to pound its rivals, investors have little reason to turn to gold. A rate hike is bearish for gold, since gold becomes less competitive with yield-bearing assets. So, the growing likelihood that we’ll see a rate hike later in December has been bad news for the precious metal.

US manufacturing numbers have looked weak in recent readings, indicative of continuing weakness in the manufacturing sector. The Empire State Manufacturing Index posted a dismal reading of -10.7 points, worse than the estimate of -5.3 points. This marked a fourth straight decline by the important indicator. The Philly Fed Manufacturing Index posted a weak gain of 1.9 points. If the ISM Manufacturing PMI, a key event, falls short of expectations, the US dollar could lose ground.

With the US economy generally producing strong data, speculation has increased that the Federal Reserve will change course and raise interest rates for the first time in ten years. Unemployment Claims were down sharply last week, and even a lukewarm Nonfarm Payroll report late in the week is unlikely to present an obstacle for the Fed. At the same time, there is a serious concern over low inflation levels, as the Fed has noted in the past that inflation is an important factor in the rate decision process. We’ll get a look at one more round of CPI and PPI reports prior to the Fed policy meeting on December 16, and these releases could cause some volatility in the markets if they are not close to the estimates. Meanwhile, the guessing game continues, and the markets will be closely following every key release and comments from Fed members in the two weeks leading up to the critical December policy meeting.

XAU/USD Fundamentals

Tuesday (Dec. 1)

• 14:45 US Final Manufacturing PMI. Estimate 52.6 points
• 15:00 US ISM Manufacturing PMI. Estimate 50.6 points
• 15:00 US Construction Spending. Estimate 0.5%
• 15:00 US ISM Manufacturing Prices. Estimate 40.0 points
• All Day – Total Vehicles Sales. Estimate 18.0M
• 16:45 US FOMC Member Charles Evans Speaks

Upcoming Key Events

Wednesday (Dec. 2)

• 13:15 ADP Nonfarm Employment Change. Estimate 191K
• 17:25 Fed Chair Janet Yellen Speaks

*Key releases are highlighted in bold

*All release times are GMT

XAU/USD for Tuesday, December 1, 2015

XAU/USD December 1 at 12:30 GMT

XAU/USD 1068.40 H: 1074 L: 1063

XAU/USD Technical

• XAU/USD posted gains in the Asian session but has given up some of these gains in European trade.
• 1080 is a weak resistance line.
• 1043 is providing support.
• Current range: 1043 to 1080

Further levels in both directions:

• Below: 1043, 1024 and 980
• Above: 1080, 1098, 1134 and 1151

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged, indicative of the lack of movement from the pair. Long positions continue to make up a strong majority (72%), indicative of strong trader bias towards gold prices reversing directions and moving to higher levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.