Gold spot price: Sinking under weight of Chinese and US Manufacturing PMIs

on Dec 2, 2013
Updated: Oct 21, 2019
Listen Monday, December 2nd:_ The XAU/USD last week scored a 0.80 percent gain, closing at 1251.21 and limiting November’s losses to seven percent. The pairing last week moved within the range 1258.07 to 1223.59 – its lowest point since 8 July – with the price action initially dropping to test the lower lines of the two descending channels within which the price has been trading since 28 August and 28 October respectively.

Since 20 November the price has been consolidating beneath the 15 October low of 1251.54, a level which has been providing strong resistance.
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So far in today’s trading, spot gold has been moving between 1249.75 and 1226.75, pulling away from the upper line of the channel from 28 August, to be currently trading at 1229.43.

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The pairing opened today a gap down at 1249.46, following release of the Chinese Manufacturing PMI data.
The monthly Markit-HSBC Manufacturing Purchasing Managers Index rose to 50.8 points in November from its flash reading of 50.4, to be almost unchanged from the prior level of 50.9. Activity in the PRC’s manufacturing sector thus rose for the fourth consecutive month and at the fastest pace since March. The positive reading was supported by domestic demand, albeit with new orders rising in only some sectors.

The indicator proved to be in accord with the PRC government’s official November data, which remained unchanged from 51.4 points in October.
Chinese equities markets rose after the release, with Hong Kong’s Hang Seng index climbing 0.7 percent after having been up just 0.1 percent pre-release.

Financial media are today reporting that major US banks have begun to liquidate treasury bond holdings in a move being interpreted as a desire to hedge against the negative effects of QE tapering by the US Federal Reserve. The reports are intensifying speculation that the Fed is likely to decide on a start to tapering at its meeting on 17-18 December. The Dollar Index rose by 0.4 percent to 80,840 once the story broke and gold fell by more than one percent to its ongoing intraday low.

Mumbai-based commodities broker Anand Rathi observed in a client note today that “economic data that came out from the US was mostly positive last week, maintaining fears that the Fed might consider tapering down its asset purchases”. He added that “a December start to tapering, although unlikely, cannot be completely ruled out. Much of this could depend on how the payrolls data comes out this week”.
Spot gold fell even further after the release of the ISM US Manufacturing PMI, which rose to 57.3 points in November from 54.3, whereas analysts had been expecting no change.
According to Bloomberg, holdings in gold-backed exchange-traded products dropped by 0.7 metric ton to 1,841.9 tons on 29 November, hitting the lowest point since March 2010.
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