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Gold Price Struggling on Strong US Data

Updated on
  • Positive GDP Numbers Restrict Upside Potential
  • High Flying Equities Market also a Factor
  • Key Chinese PMI Data Next Big Driver

The gold market remains restrained having closed below the intraday high. It now trades below $1770 as it continues to trend downward in recent weeks amid resurging positivity in the global economy, particularly in the US, and a US Dollar that continues to stay weak in the forex market. These factors, not least the high-flying stock market, and rising bond yields have kept the heat on gold recently as the precious metals market looks toward the next quarter. Important data that could indicate how gold will finish the week comes from PMI numbers in China to be released later.

GDP Smash Pressures Gold Prices

GDP figures in the US this week came in broadly ahead of analyst expectations. A 6.4% gain indicates strongly that the economy is getting back into action in a major way. The ripple effect from this number is a more risk-on approach to investing, something that does not typically favor gold and its status as a major safe haven in times of trouble.

This has been reflected in recent price drops, and again yesterday as the precious metal traded within range and finished slightly lower. The solace in this will be that such big numbers are only preliminary as yet and could see a slight downward revision. Even so, they will still represent a big jump on the 4.3% of the previous quarter.

Dollar Weakness & Equities Records

Continuing weakness in the USD forex market although it may boost other major currencies around the world, does no favors to the price of gold either. Again this price weakness is indicative of an investment approach that is more tolerant of risk which in turn, can weigh on gold prices.

There is still a lack of clarity for the gold market going into the Friday trading session though as stock market futures and the US Dollar Index, a measure of Dollar strength against a basket of major global currencies, point to a negative opening. This could leave gold to end the week on a higher note, though more sideways trading in the market is likely with the mixed messages. Equities also rallied late toward the close to further grab control of trading momentum.

China PMI Data Closely Monitored

A key driver for gold prices today could have come from the Asian trading session and news on Chinese PMI numbers. These non-manufacturing PMI numbers fell from the high of the previous month to 54.9 with the composite PMI also falling. Contributing factors include international shipping tailbacks and spiraling costs in this logistics area.

This is a move that could well give power to the gold market later in the day even though the data is still broadly positive and indicates that the economy is continuing to grow as they look to leave the COVID-19 pandemic in their rear-view mirror.

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.