Gold Prices Rebound Following Soft Inflation Report

Gold prices rebounded from session lows bouncing from support near the 200-day moving average at 1,305.  Softer than expected U.S. PPI data weighed on the dollar, and paved the way for gold prices to rebound. Prices have been under pressure as the dollar gained during the past week.  Resistance on the yellow metal is seen near the 10-day moving average at 1,313.  Momentum on the yellow metal is neutral as the MACD (moving average convergence divergence) histogram prints in the red with an increasing trajectory which points to consolidation.

U.S. PPI Was Softer than Expected

U.S. April PPI rose 0.1%, with the core up 0.2% after gains of 0.3% for both in March. Expectations were for the headline number to increase by 0.2%. The headline is a little softer than expected, while the core hit the mark. Prices of goods were unchanged following the hotter 0.3% increase previously. Energy prices edged up 0.1% from -2.1%, while food prices fell 1.1% versus the prior 2.2% gain. Costs in the service sector were 0.1% higher following March’s 0.3% gain. On a year over year basis, headline PPI slowed to 2.6% year over year versus 3.0% year over year, and the core slipped to 2.3% year over year from 2.7% year over year.

French industrial production dropped

French industrial production dropped -0.4% month over month, much lower than market consensus, which predicted another rise of 0.4% month over month, after a 1.1% month over month which was revised down from 1.2% in February. Manufacturing rose 0.1% month over month and the correction in March was largely due to a -8.3% month over month drop in coke and refinery activity. The annual rates fell back to 1.8% year over year from 3.8% year over year for industrial production and to just 0.4% year over year for manufacturing, from 2.3% year over year in the previous month.

U.S. MBA mortgage market index sank

U.S. MBA mortgage market index sank 0.4% and was accompanied by a 0.2% decline in the purchase index and a 0.6% drop in the refinancing index for the week ended May 4. The average 30-year fixed mortgage rate fell 2 basis points to 4.78% after the FOMC underscored the symmetry of its inflation target and the April payrolls miss, not that this provided much comfort to mortgage buyers with the T-note topping 3.0%.