Price of Gold Fundamental Daily Forecast – Gains Capped as Strong Euro Zone Data Offsets Weak Chinese Report

Gold futures are trading higher on Tuesday, helped by disappointing Chinese manufacturing and services data, which renewed concerns over a slowdown in its economy.  A weaker U.S. Dollar could also be underpinning gold; however, gains are likely being limited by rising U.S. Treasury yields and stronger-than-expected Euro Zone economic data.

At 09:26 GMT, June Comex gold is trading $1286.20, up $4.70 or +0.37%.

China Data Disappoints

According to data released early Tuesday, China’s manufacturing sector grew slower than expected in April. The Caixin/Markit factory Purchasing Mangers’ Index for April was 50.2, lower than the March reading of 50.8. It also came in below the 51 estimate.

China’s National Bureau of Statistics released official manufacturing PMI for April. It fell to 50.1 from 50.5 in March. Traders were looking for a reading of 50.5.

Euro Zone Q1 Economic Growth Stronger than Expected, Unemployment Falls

Reuters reported that Euro Zone economic growth was stronger than expected in the first quarter, rebounding strongly from a slump in the second half of 2018, while unemployment fell to its lowest rate in more than a decade.

Eurostat said that gross domestic product in the Euro Zone rose 0.4 percent quarter-on-quarter n the first three months of 2019, up from 0.2 percent in the fourth quarter of 2018 and 0.1 percent in the third.

Year-on-year, Euro Zone GDP rose 1.2 percent, the same increase as in the last quarter of 2018. Traders were looking for a 0.3 percent quarterly increase and a 1.1 percent annual expansion.

Eurostat also said that Euro Zone unemployment fell to 7.7 percent.

Daily Forecast

With the strong Euro Zone stats offsetting China’s weak data, gold traders will likely be focusing on the direction of the U.S. Dollar, Treasury yields and appetite for risk. However, concerns about the Fed’s interest rate and policy decisions will likely be the biggest influence of prices today. Volume and volatility could be light and the range tight as the Fed begins its two-day meeting later today.

The Fed is widely expected to hold interest rates steady as policymakers balance recent stronger-than-expected U.S. economic growth against sluggish inflation.

On Monday, gold prices were capped after U.S. equities hit record highs              Strong U.S. consumer spending, which increased by the most in more than 9-1/2 years in March, also limited gains.

Later today, investors will get the opportunity to react to the latest data on Employment Cost Index, S&P/CS Composite-20 HPI, Chicago PMI, Consumer Confidence and Pending Home Sales.