Gold Prices Move Sideways Ahead of Fed Meeting

Gold prices consolidated moving sideways as the dollar initially rallied and then sold off. Prices have been range bound for the past 4-weeks but will likely experience volatility following the ECB and FED meetings next week.  Weaker than expected German trade data and Industrial production could buoy the greenback and weigh on gold prices. Support is seen near an upward sloping trend line at 1,288. Resistance is seen near the 50-day moving average at 1,315. Momentum is positive to neutral as the MACD prints in the black with an upward sloping trajectory.

German trade surplus narrows

German trade surplus narrows as exports decline. Germany reported a trade surplus of EUR 18.4 billion for April, down from EUR 21.6 billion in the previous month. Exports fell -0.3% month over month, while imports rose 2.2% month over month. The unadjusted current account surplus narrowed to EUR 22.7 billion from EUR 29.6 billion, so something for Merkel to argue with in the light of ongoing criticism of Germany’s large trade and current account surpluses.

German industrial production contracted

German industrial production contracted -1.0% month over month. Expectations had been for a slight rise over the month, but after the unexpected slump in orders yesterday, the weak production number is not a total surprise. At the same time, March data were revised up to 1.7% month over month from 1.0% month over month reported initially, so the trajectory is not as weak as the headline suggests. Annual growth slowed to a still healthy 2.0%, but nevertheless the weakness in orders and surveys showing a markedly less optimistic view on the outlook confirm that the German cycle has peaked, and that growth is slowing down. Capacity constraints are partly to blame but worries about the export outlook amid an increasingly hostile trade environment are clearly also having an impact.

French production also disappoints

French production also disappoints. Like the German numbers for April, French production data came in weaker than expected, with the overall reading falling -0.5% month over month, after already declining -0.4% month over month in March. Manufacturing actually held up better and rose 0.4% month over month, after 0.3% month over month in the previous month, with the main drag on overall production coming from another slump in coke and refinery production, as well as electricity and gas. Still, the overall weakness, coupled with the disappointing German numbers adds to signs that the Eurozone recovery is already running out of steam.