Gold Pushes Higher, US Manufacturing PMI Slips

Gold has strengthened on Monday, as the base metal trades at $1076.30 per ounce in the North American session. On the release front, today’s key event was ISM Manufacturing PMI. The index was a big disappointment, dropping to 48.2 points, which was well below expectations.

Gold has ushered in 2016 on a positive note, posting strong gains in the first trading day of the year. Investors have been snapping up gold on Monday, considered a safe-haven commodity. This was in response to the earlier release of weak Chinese manufacturing data, which has underscored the slowdown affecting the world’s second largest economy. Chinese Caixin Manufacturing PMI, a key indicator, slipped to 48.2 points in December, short of the forecast of 48.9 points. The index managed to break above the 50-point level only once in 2015, pointing to ongoing contraction in the Chinese manufacturing sector. As well, another crisis in the Middle East is brewing, as Saudi Arabia abruptly cut off relations with Iran following the execution of a Saudi cleric which led to the ransacking of the Saudi embassy in Tehran.

The US economy showed strong improvement in 2015, but there are sectors which have lagged behind the recovery, such as the manufacturing industry. Recent manufacturing releases have missed expectations, and the negative trend continued on Monday. ISM Manufacturing PMI, a key indicator, slipped to 48.2 points, well short of the forecast of 49.1 points. This weak reading is raising concerns, since it marks back-to back releases below the 50-point level, which separates expansion from contraction. It is also the sixth consecutive month that the PMI has softened. As well, ISM Manufacturing Prices dipped to 33.5 points, well below expectations.

XAU/USD Fundamentals

Monday (Jan. 4)

  • 14:45 US Final Manufacturing PMI. Estimate 51.1 points. Actual 51.2 points
  • 15:00 US ISM Manufacturing PMI. Estimate 49.1 points. Actual 48.2 points
  • 15:00 US Construction Spending. Estimate 0.7%. Actual -0.4%
  • 15:00 US ISM Manufacturing Prices. Estimate 36.5 points. Actual 33.5 points

*Key Events are in Bold

*All release times are GMT

XAU/USD for Monday, January 4, 2016

Forex Rate Graph 21/1/13

XAU/USD January 4 at 16:35 GMT

XAU/USD 1076.30 H: 1083.00 L: 1061.50

XAU/USD Technical

S3 S2 S1 R1 R2 R3
980 1024 1043 1080 1098 1134
  • XAU/USD posted gains in the Asian and  European sessions, but has retracted in North American trading.
  • There is weak resistance at 1080. This line was tested earlier in the day.
  • 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

In the XAU/USD ratio, long positions continue to command a solid majority (74%), indicative of strong trader bias towards gold prices continuing to move higher.

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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.