Gold drops below $1,300/oz after initial jobless claims

US markets slipped lower yesterday as valuation concerns re-emerged. Both the S&P 500 and DJIA extended losses for a second session as hesitant investors looked for an excuse to take short term profits off the table. Wal-Mart’s forecast of lower than expected profits provided jittery investors with the catalyst needed to pull out of equity markets as confidence waned. Despite some encouragement from positive economic data released yesterday investors struggled to justify the recent record levels and continue to look towards the Fed for guidance.

Highlights from yesterday’s data heavy session were notably the Empire State manufacturing index which surged to 19.01 in May, significantly above the expected reading of 6.0 as it rose to its highest level since June 2010. Consumer prices inflated 0.3% m/m in April, in line with expectations while initial jobless claims came in at 297K during the week ending May 10th, the lowest reading for seven years and a further indication that the economic recovery was picking up pace. The Philly Fed index also surprised on the upside, coming in at 15.4 while market participants polled by Bloomberg expected a reading of 14.0. However, investors were shaken by weaker than expected industrial production growth, which contracted 0.6% m/m in April from 0.9% growth the previous month.

Spot gold prices reversed Wednesday’s gains yesterday, as the encouraging initial weekly jobless claims emphasised the bullish underlying conditions despite the current short term sell-off in equity markets. Prices have faced firm resistance towards the 50 day MA in recent sessions, unable to breakout significantly above $1,310/oz. Yesterday saw prices decline below $1,300/oz as they tested support offered by the 100 day MA, currently around $1,292/oz. With the University of Michigan confidence index and April housing starts expected later today, any positive surprises could see gold test recent lows towards $1,285 if immediate support levels are breached as prices are squeezed into a tighter pattern.

Empire State manufacturing index rises towards four year high

EMPRGBCI Index US Empire State 2014 05 16 07 27 21

US initial weekly jobless claims decline to their lowest levels in 7 years

INJCJC Index US Initial Jobless 2014 05 16 07 31 00

Gold prices slip below $1,300 and continue to trade within a tight range

XAU Curncy Gold Spot Oz 2014 05 16 07 45 32


Events for today

1330

US

Apr

Housing starts

1455

US

May

Michigan Survey

OE:

May FTSE 100 Index & Equity (LIFFE)   

 

All times UK Local Time

Topics: Equities, Gold
More from: Kash Kamal