Gold Down Slightly Ahead of Manufacturing PMI

Gold prices are stable on Monday, as the metal is trading at a spot price of $1272.94. On the release front, today’s highlight is ISM Manufacturing PMI. The markets are expecting the index to soften in the January report.

With the Greek election behind us, Greece and its international creditors must reach some accommodation over Greece’s EUR 320 billion bailout program. European Commission President Jean-Claude Juncker has offered an olive branch to Athens, saying he is willing to scrap the troika mission, which represents the European Commission, ECB and the IMF and governs the bailout. However, he ruled out writing off any part of Greece’s debt. The new Greek government has stated it wishes to remain in the Eurozone but does not want to accept more bailout funds under the present agreement. We can expect some tough negotiations in the upcoming weeks over the bailout.

US Advance GDP for Q4 disappointed, posting a gain of 2.6%. The markets had anticipated a gain of 3.0%. Still, market sentiment towards the US economy remains positive, underscored by the Federal Reserve statement last week, where the Fed noted solid growth in the economy. The Fed remains on track to raise rates later in 2015, and the dollar will likely benefit as speculation continues over the timing of a rate hike.

The Federal Reserve reiterated in its policy statement on Wednesday that it would be “patient” regarding the timeline for a raise in interest rates, which have been close to zero since 2008. However, the Fed also noted that the US economy was expanding at a “solid pace” thanks to the robust labor market. This vote of confidence pushed gold prices to lower levels. The Fed is widely expected to raise rates sometime during the year, so the Fed rate watch is sure to continue as the markets look for clues as to when the Fed will make a move.

XAU/USD for Monday, February 2, 2015

XAU/USD February 2 at 12:45 GMT

XAU/USD 1272.94 H: 1283.45 L: 1271.54

XAU/USD Technical

• XAU/USD was flat in the Asian session. The pair has edged lower in European trade but remains close to the 1275 resistance line.
• 1275 is a weak resistance line. 1300 is stronger.
• 1255 is an immediate support level.
• Current range: 1255 to 1275

Further levels in both directions:

• Below: 1255, 1240, 1215 and 1200
• Above: 1275, 1300, 1322, 1345 and 1375

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions on Monday. This is consistent with the pair’s movement, as gold has posted slight losses. The ratio has a majority of long positions, indicating trader bias towards gold moving to higher ground.

XAU/USD Fundamentals

• 8:15 Spanish Manufacturing PMI. Estimate 54.2 points. Actual 54.7 points.
• 8:45 Italian Manufacturing PMI. Estimate 49.3 points. Actual 49.9 points.
• 9:00 Eurozone Final Manufacturing PMI. Estimate 51.0 points. Actual 51.0 points.
• 13:30 US Core PCE Price Index. Estimate 0.0%.
• 13:30 US Personal Spending. Estimate -0.1%.
• 13:30 US Personal Income. Estimate 0.2%.
• 14:45 US Final Manufacturing PMI. Estimate 54.1 points.
• 15:00 US ISM Manufacturing PMI. Estimate 54.9 points.
• 15:00 US Construction Spending. Estimate 0.9%.
• 15:00 US ISM Manufacturing Prices. Estimate 40.1 points

*Key releases are highlighted in bold

*All release times are GMT

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