The dollar index held on course to weaken for the fifth straight week despite recovering some the previous session’s heavy losses as weaker US data released yesterday saw investors cautiously retreat. Having reached a fresh four month low yesterday at 93.133 on weaker than expected economic data, the greenback has lost over 5.5% against a basket of major currencies, on track to post a fifth consecutive week of losses after briefly testing levels towards 100.00 in mid-April. Yesterday’s release of weaker than expected PPI final demand data for April, which came in at -0.4% m/m against expectations of a modest 0.1% m/m expansion, indicated factory gate prices were struggling to recover and put further pressure on the dollar.
A modest recovery in the USD early on today saw spot gold prices test support towards the 200 day MA. Prices for the yellow metal had rallied strongly throughout the week, building on support towards the 50 day MA towards $1,190/oz as gold prices reached as high as $1,227/oz yesterday. With the dollar index posting a recovery near 94.00 this morning we have seen some weakness in gold prices early on as intraday moves briefly test support at the 100 day MA before partially recovering just above $1,218/oz, where the 200 day MA resides. However, with the dollar index paring these early gains, gold prices remain on track to post gains for a forth day but any reversal in the USD could present further upside pressure to spot gold prices with the potential to trade back below $1,200/tonne in the near term.