Gold Jumps to $1288 on Weak US Manufacturing Report

Gold has shown some volatility to start the week, as the metal posted strong gains before retracting. In Monday’s North American session, the metal is trading at a spot price of $1274.65 an ounce in the North American session. On the release front, the Empire State Manufacturing Index declined 9.0 points, much weaker than expected. On Tuesday, the US will release CPI and Building Permits.

The US manufacturing industry continues to struggle, and very weak manufacturing data on Monday saw gold briefly climb close to the $1290 level. Empire State Manufacturing Index posted a sharp decline of 9.0 points, well off the estimate of a gain of 7.2 points. The indicator had surprised with  a gain of 9.6 points in April, and the markets were counting on another strong gain. Manufacturing continues to be a soft spot in a generally solid US economy, as weak global economic conditions and the slowdown in China have reduced demand for US-made goods.

US releases ended last week on a strong note, highlighted by solid retail sales and consumer confidence reports. Core Retail Sales posted a strong gain of 0.8%, above the estimate of 0.6%. Retail Sales surged 1.3%, its strongest gain in over six years. The gain was all the more impressive as the markets had anticipated a decline of 0.3%. Consumer confidence also looked sharp, as UoM Consumer Sentiment jumped to 95.8 points, compared to the estimate of 89.9 points. This was the indicator’s best showing since April 2015. On the inflation front, PPI posted a small gain of 0.2%, shy of the forecast of 0.3%. We’ll get a look at CPI reports on Tuesday. Later in the week, the Federal Reserve releases the minutes of its April policy meeting. The Fed has hinted that a rate hike in June remains on the table, and any hints about a June move could boost the US dollar. Still, the markets remain skeptical about  rate hike in June, with the implied probability of a hike down to just 4%.

Monday (May 16)

  • 8:30 US Empire State Manufacturing Index. Estimate 7.2. Actual -9.0
  • 10:00 US NAHB Housing Market Index. Estimate 59. Actual 58
  • 16:00 US TIC Long-Term Purchases. Estimate 36.5B

Upcoming Key Events

Tuesday (May 17)

  • 8:30 US Building Permits. Estimate 1.13M
  • 8:30 US CPI. Estimate 0.4%
  • 8:30 US Core CPI. Estimate 0.2%

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Monday, May 16, 2016

XAU/USD May 16 at 11:20 EDT

Open: 1273.90 Low: 1272.40 High: 1288.75 Close: 1274.65

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1207 1232 1255 1279 1303 1324
  • XAU/USD posted gains in the Asian and European sessions. The pair has retracted and posted considerable losses in North American trade
  • 1255 is providing strong support
  • There is weak resistance at 1279
  • Current range: 1255 to 1279

Further levels in both directions:

  • Below: 1255, 1232 and 1207
  • Above: 1279, 1303, 1324 and 1345

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement on Monday. Long positions have a strong majority (61%). This is indicative of trader bias towards XAU/USD climbing 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.

Kenny Fisher

Kenny Fisher

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