Gold Prices Consolidate as Dollar Gains Traction

Gold prices consolidate and traded sideways moving lower initially down to support near an upward sloping trend line that comes in near 1,285.  Resistance is seen near 1,307. Stronger than expected payrolls buoyed the dollar capping gold prices. Momentum is neutral as the MACD (moving average convergence divergence) histogram prints in positive territory with a flat trajectory which reflects consolidation.

U.S. nonfarm payrolls increased more than Expected

U.S. nonfarm payrolls increased a solid 223k in May, more than expectations of a 190K increase. This follows gains of 159k in April and 155k in March, for a net upward revision of 15k. The unemployment rate fell to 3.8% from 3.9% and is the lowest since late 1969. Average hourly earnings rose 0.3% after edging up 0.1% previously and are up 2.71% year over year versus 2.56% year over year. Hours worked were unchanged at 34.5. The labor force participation rate dipped to 62.7% from 62.8%. Other details show the labor force rebounded a modest 12k after dropping 236k in April, while household employment climbed 293k after the prior 3k gain. Government added 5k.

Eurozone manufacturing PMI confirmed

Eurozone manufacturing PMI confirmed at 55.5, as expected. The German reading was revised slightly higher to 56.9 from 56.8, the French revised down to 54.4 from 55.1 and the Italian reading fell back to 52.7 from 53.5. A broad decline in confidence with Markit reporting slower growth of output, new orders, new export business and employment. Growth was led by the Netherlands, Austria and Germany, even as the pace of growth in these countries eased slightly. France, Ireland and Greece meanwhile reported an acceleration. Markit reported that the outlook remained positive with companies reporting that they expect to be higher in one year’s time.

The UK’s May manufacturing PMI unexpectedly rose

The UK’s May manufacturing PMI unexpectedly rose, rising to 54.4 headline reading after April’s 53.9 outcome, which is a 17-month low. The median forecast had been for a decline to 53.6. Markit, the compiler of the survey, notes there are caveats to the headline improvement. While growth of production accelerated to its best rate on the year so far, this was mostly achieved by the steepest build-up of finished goods inventories in the 26-year history of the survey. There was also a sharp reduction in the backlogs of work.