Gold Price Prediction – Gold is Buoyed by Strong German Industrial Production

Gold consolidating ahead of the U.S. employment report. Thursday’s previews showed a weaker than expected ADP private payroll report and a subdued challenger report.  Recent increases in the jobless claims data is also weighing on the employment picture, as trade tariffs begin to take their toll on the U.S. economy. Data in Europe was mixed as industrial production in German jumped more than expected while machinery orders slumped. Support on the yellow metal is seen near the 10-day moving average at 1,254. Resistance is seen near the 50-day moving average at 1,288. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal.

German industrial production jumped

German industrial production jumped 2.6% month over month. Expectations were for a modest rebound of 0.1% month over month. However, after Thursday’s surprisingly strong orders number an upside surprise had been likely. The strong monthly growth rate lifted the annual rate to 3.1% year over year, which ties in with reports that companies are facing capacity constraints as well as lengthened delivery times, with still robust demand underpinning ongoing job creation and creation room to pass on higher costs.

German VDMA machinery orders dropped

German VDMA machinery orders dropped -1% year over year in May. Unlike the official manufacturing orders number, the VDMA machinery orders report disappointed and showed a continuation of the deteriorating trend, with orders down -1% year over year in May and the three months rate falling back to just 2%, from 6% in April and compared to 12% at the start of the year. The export orders reading turned negative in the 3 months year over year rate, for the first time in a very long while, adding to concerns that escalating trade tensions are hitting the German export-oriented economy.

FOMC minutes showed most participants’ views the economy were little changed

FOMC minutes showed most participants’ views the economy were little changed, but incoming data suggested Q2 growth had picked up. Several favorable factors were noted, including the strong labor market, simulative fiscal policies accommodative financial conditions and high levels of confidence. Hence, they ascribed to further “gradual increases” in the funds rate. In terms of risks, most noted the uncertainties with trade policies had “intensified,” and those uncertainties could have negative effects on business sentiment and investment spending.