Gold Drops to Support but Prices are Oversold

Gold prices moved lower as the dollar continued to gain traction pushing the yellow metal to support near the 200-day moving average at 1,304. Prices are testing the March lows at 1,306.  Resistance is seen near the 10-day moving average at 1,327. Momentum is negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to lower prices. The fast stochastic is printing a reading of 8, below the oversold trigger level of 20 which could foreshadow a correction.

The ISM Manufacturing Index was Weaker than Expected

The ISM Manufacturing index showed that national factory activity dropped to a reading of 57.3 last month from 59.3 in March. The survey’s prices index increased 1.2 points to 79.3, the highest reading since April 2011. Last month, price increases occurred across 17 of 18 industry sectors. The ISM’s measure of factory employment dropped in April and the ISM said there were indications that labor and skill shortages were affecting production output.

U.S. chain store sales fell

U.S. chain store sales fell 1.4% in the week ended April 28, according to The Retail Economist, after edging up 0.5% previously. And the 12-month pace slowed to 2.4% year over year versus 3.7% year over year previously, and the 3.8% clip from April 14. This is the softest year over year pace since early March, partly attributable to Easter, which fell earlier this year, April 1, compared to March 16 in 2017.

The upcoming FOMC meeting is flying under the radar given the various factors that are overshadowing. Plus, the 2-day meeting, which begins Tuesday afternoon, is expected to be a nonevent. No one is anticipating any rate action, nor any significant change in tone in the policy statement. And, there’s no press conference this time around, nor any updates on forecasts/dots. Though data has reflected a slowing in growth in Q1, much of the slide has been from robust levels. And, there is also support on the way from fiscal stimulus.