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Price of Gold Fundamental Daily Forecast – Lower-than-Expected U.S. Flash Manufacturing PMI Could Trigger Further Rally

By:
James Hyerczyk
Published: Sep 23, 2019, 12:43 UTC

A lower than expected U.S. Flash Manufacturing PMI number could further boost gold prices since it will likely increase the chances of a Fed rate cut in October. Currently, the market is expecting the Fed to skip October and cut rates in December instead.

Comex Gold

Gold futures are trading higher on Monday as weaker-than-expected economic data from the Euro Zone is raising fears of a global economic slowdown. The news could mean the European Central Bank will be forced to cut interest rates again in December or implement additional stimulus measures. Lower rates and more stimulus tend to be supportive for gold prices.

At 12:31 GMT, December Comex gold is trading $1526.30, up $11.20 or +0.74%.

According to Reuters, “German private sector activity shrank for the first time in 6-1/2 years in September as a manufacturing recession deepened unexpectedly and growth in the service sector lost momentum, a survey showed on Monday.”

Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, fell to 49.1 to 51.7 in the previous month. Analysts were looking for a reading of 51.4.

“The economy is limping toward the final quarter of the year and, on its current trajectory, might not see any growth before the end of 2019,” Phil Smith from IHS Markit said.

“All the uncertainty around trade wars, the outlook for the car industry and Brexit are paralyzing order books, with September seeing the worst performance from the sector since the depths of the financial crisis in 2009.”

Military Build-Up in Saudi Arabia

On Friday, the Pentagon ordered additional troops to be deployed in the Gulf region to strengthen Saudi Arabia’s air and missile defenses following an attack on Saudi oil facilities.

U.S. Secretary of State Mike Pompeo said on Sunday that the troops are for “deterrence and defense” and Washington aimed to avoid war with Iran.

The news may be adding to global geopolitical risks as tensions remain elevated in the Middle East following an Iranian attack on Saudi Arabian oil production on September 14.

Daily Forecast

The weakness in the German economy could underpin gold prices all-session along with a drop in U.S. Treasury yields and lower demand for risky assets. However, the weaker Euro and the stronger U.S. Dollar Index could keep a lid on gains.

U.S. Flash Manufacturing PMI, due to be released at 13:45 GMT, could also influence the price action later in the day. Traders are looking for a reading of 50.3, unchanged from the previous month.

A lower than expected number could further boost gold prices since it will likely increase the chances of a Fed rate cut in October. Currently, the market is expecting the Fed to skip October and cut rates in December instead. A better than expected number could help erase current gains and turn gold prices lower.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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