Gold Punches Above $1300 Level

Gold is steady on Monday, as the metal has paused from Friday’s strong gains. Gold is trading at a spot price of $1295.42 an ounce in the North American session. On the release front, it’s a quiet start to the new trading week. The key event of the day, ISM Manufacturing PMI, posted a weak reading of 50.8 points, below the estimate.

Gold prices continue to move upwards. The metal surged 4.8% last week and briefly pushed above the $1300 level earlier on Monday. This marked the first time gold has traded above $1300 since mid-January. Gold has taken advantage of the Federal Reserve’s decision not to raise interest rates and also benefited from a soft US GDP release last week.

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. 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%. Also on Monday, Final Manufacturing PMI and Construction Prices also missed expectations, but ISM Manufacturing Prices easily beat the forecast. Manufacturing remains a sore spot, as the sector continues to lag behind the economy’s generally solid performance, as the global demand for US products has taken its toll.

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 reading will not help the cause of Fed policymakers who favor a rate hike, especially with inflation at low levels. The markets, which were not expecting an April hike, are keeping a close eye on key numbers, looking for clues as to whether the Fed will make a move at its June policy meeting. The April policy statement sounded cautiously optimistic about the US economy, but did not provide any clues about a hike in June.

XAU/USD Fundamentals

Monday (May 2)

  • 9:45 US Final Manufacturing PMI. Estimate 51.0. Actual 50.8
  • 10:00 ISM Manufacturing PMI. Estimate 51.6 points. Actual 50.8
  • 10:00 US Construction Spending. Estimate 0.5%. Actual 0.3%
  • 10:00 ISM Manufacturing Prices. Estimate 51.0. Actual 59.0
  • Tentative – US Loan Officer Survey

*Key releases are highlighted in bold

*All release times are EDT

XAU/USD for Monday, May 2, 2016

XAU/USD May 2 at 11:20 EDT

Open: 1294.90 Low: 1288.73 High: 1303.79 Close: 1295.42

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1232 1255 1279 1303 1324 1345
  • 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 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.

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.