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Gold Prices Rise on Dollar Weakness Despite a Robust ISM Manufacturing Report
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Prices paid rose to 76.2 well above expectations reflecting robust inflation in manufacturing
Gold prices moved higher for a second consecutive trading session. The dollar eased slightly on Tuesday, paving the way for higher gold prices. Yields were mixed, with the 10-year treasury yield rising, but the 2-year declined. The yield curve steepened, helping gold prices gain traction. A CNBC survey shows that participants are pricing in approximately 4-rate hikes. The ISM manufacturing report came out stronger than expected and price-paid, surged to a decade high.
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Technical Analysis
Gold prices edged moved higher on Tuesday. Support is seen near an upward sloping trend line seen near 1,769. A break of this support level would lead to a test of the December lows at 1,753. Resistance is seen near the 200-day moving average at 1,805. The 50-day moving average crossed below the 200-day moving average, which means that a downtrend is in place. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is negative as the MACD (moving average convergence divergence) index has generated a crossover sell signal. This situation occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram prints in negative territory with a downward sloping trajectory pointing to lower prices.
ISM Manufacturing Beats Expectations
Manufacturing activity in the United States declined in January from December but was higher than expectations. According to the Institute of Supply Management, manufacturing slipped to 57.8 in January, below the 58.8 index level reported in December. Expectations were for a larger decline to 57.4. There was a mixed back reported in the sub-components. New orders came in at 58.9 versus 61.0 last. Production came in at 57.8 versus 59.4 in December. Prices paid increased to a diffusion index level of 76.1 in January, up from 68.2 and compared to expectations of 67.
About the Author
David Beckerauthor
David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.
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