Spot gold prices post further losses as confidence gains

Friday, July 25, 2014

Spot gold prices shed 0.8% yesterday, closing lower for the third consecutive session. Intraday dips breached the 50 day MA around $1,294 as improving risk appetite saw the yellow metal trade towards $1,287/oz. Prices have since weakened further this morning, underpinned by newly found resistance at the 50 day MA as near term support levels towards $1,286 remain to be tested. With gold on track to post losses for a second consecutive week any further improvement in global economic growth could see weakness towards June’s lows around $1,250/oz. 

Fresh gains in US markets saw the S&P 500 reach a new record high as markets managed to hold on to support around current levels. US equities managed to nudge higher in what was a quiet session as mixed macro data failed to impress investors and spur a more significant rally. Initial jobless claims for the week ending July 19th further reinforced the labour market outlook, with claims dropping 19,000 w/w to 284K, its lowest level in eight years. Market participants polled by Bloomberg had expected a slight increase in initial jobless claims w/w from 303K to 307K and the bullish reading will swell the ranks of policymakers who expect rates to rise sooner rather than later. The manufacturing PMI reading failed to rally for the third straight month as it came in below expectations of 57.5, recording a preliminary reading of 56.3 in July. Market participants have been split between mixed economic data and corporate earnings but the overall positive outlook has buoyed risk assets in recent sessions.

The positive mood from Wall Street carried over to the Asian trading session with most benchmark indices in the region posting gains in overnight trading. Japanese stocks led the charge higher despite June data showing a fall in inflation. CPI data slowed to 3.3% y/y in June from 3.4% y/y the previous month, including the effect of the consumption tax increase which added around 2% to the headline figure. The KPY traded towards 101.80 against the dollar yesterday, weakening for the fifth straight session, but activity overnight and early on this morning has seen the yen strengthen slightly towards 101.70. Trading remains within July’s ranges with firm resistance emerging at the 50 day MA.

Spot gold prices breached lower yesterday

XAU Curncy Gold Spot Oz D 2014 07 25 07 42 20

Initial jobless claims fall to their lowest level in 8 years

INJCJC Index US Initial Jobless 2014 07 25 07 35 34

Events for today

0030

JP

Jun

CPI

0700

DE

Aug

GfK Consumer Sentiment

0930

UK

Q2

GDP Preliminary

1330

US

Jun

Durable Gds & New Orders

OE: 

Aug  Heating Oil & RBOB (NYMEX) 

Aug  Natural Gas (NYMEX) 

Aug  Copper & Gold (COMEX) 

All times UK Local Time

Topics: Gold, PMI, JPY, CPI
More from: Kash Kamal