Gold Steady, ADP Nonfarm Payrolls Next

Gold is steady on Tuesday, continuing the lack of movement which marked the Monday session. Gold is trading at a spot price of $1286.86 an ounce in the North American session. On the release front, IBD/TIPP Economic Optimism improved to 48.7 points, but this still indicates pessimism. There are no major US releases on Tuesday. We’ll get a look at two key indicators on Wednesday – ADP Nonfarm Employment Change and the ISM Non-Manufacturing PMI.

Gold prices wrapped up April on a high note, as the metal surged 4.8% last week. On Monday and Tuesday, gold briefly pushed above the symbolic $1300 level, and the metal is currently trading close to 4-month highs. Gold has benefited from the Federal Reserve’s decision not to raise interest rates as well as last week’s soft US GDP release. As well, weak global markets has meant that investors have less appetite for risk and have flocked to gold, a safe-haven asset.

The US manufacturing sector remains a trouble spot in a generally strong US economy, as weak global demand for US-made goods has taken its toll on the industry. On Monday, US ISM Manufacturing PMI, a key gauge of manufacturing output, missed expectations. The index dipped to 50.8 points, shy of the estimate of 51.6 points. This reading just above the 50-point line points to near stagnation in the manufacturing sector. As well, Final Manufacturing PMI and Construction Prices both missed expectations, but ISM Manufacturing Prices easily beat the forecast. Last week, Core Durable Goods dropped 0.2%, well off the estimate of a 0.6% gain. This marked the fourth decline in five months. Durable Goods Orders was stronger at 0.8%, but also missed expectations, as the estimate stood at 1.9%.

The first quarter of 2016 has been marked by shaky global markets and a sharp drop in oil prices, so slower growth for the US economy was not unexpected. GDP climbed 0.5% in the first quarter, shy of the estimate of 0.7%. This was considerably lower than the 1.4% gain in the fourth quarter of 2015, and marked the weakest quarter of growth in two years. Although economic growth remains moderate, the lukewarm GDP reading will not help the cause of Fed policymakers who favor a rate hike, especially with inflation at low levels. The markets, which had not expected any moves from the Fed in April, are keeping a close eye on key numbers and looking for clues as to whether the Fed will raise rates at its June policy meeting. The April policy statement sounded cautiously optimistic about the US economy, leaving the door open regarding a rate hike in June.

XAU/USD Fundamentals

Tuesday (May 3)

• 10:00 US IBD/TIPP Economic Optimism. Estimate 46.6. Actual 48.7
• 10:30 US FOMC Member Loretta Mester Speaks
• All Day – US Total Vehicle Sales. Estimate 17.3M

Upcoming Key Events

Wednesday (May 4)

• 8:15 US ADP Nonfarm Employment Change. Estimate 205K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 54.9

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Tuesday, May 3, 2016

XAU/USD May 3 at 11:30 EDT

Open: 1289.80 Low: 1282.16 High: 1301.79 Close: 1286.86

XAU/USD Technical

• XAU/USD showed limited movement in the Asian session. The pair gained ground in the European session but has reversed directions in North American trade
• There is resistance at 1303
• 1279 is providing support
• Current range: 1279 to 1303

Further levels in both directions:

• Below: 1279, 1255 and 1232
• Above: 1303, 1324, 1345

OANDA’s Open Positions Ratio

XAU/USD ratio is  showing little movement on Tuesday, as the ratio remains close to an even split between long and short positions. This is indicative of a lack of trader bias as to what direction XAU/USD will take next.

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.