Gold descended As Manufacturing Activities Improve In Significant Economies

Gold prices plunged in the global market, with COMEX Gold Futures (GC) slipping from the level of $1301.55 (Day’s high on 1st April) to the current level of around $1290.

Gold prices slipped as global economic conditions revive after a period of a slowdown. The economic indications from the U.S. and China marked increased activities in both the significant economies.

On the data front, the latest data released from China and the U.S. marked an expansion in the manufacturing activities, which further result in increased business activities, better employment, and great consumer confidence in the economy. This fuelled the confidence of market participants and diminished their concerns over a slowdown continuation; thus, in turn exerted a pressure on gold prices.

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As per the data, the U.S. ISM Manufacturing PMI reported at 55.3 for March 2019, against the previously reported 54.2. The rise in the U.S. Manufacturing industry supported the dollar prices, which in turn, exerted pressure on gold prices.

Dollar Index (DXY) rose from the level of 97.03 (Day’s low on 1st April) to the present level of 97.46. The increase in dollar prices adjusted the risk appetite of bulli

Apart from the rising dollar, a drastic gain in bond yields further exerted the pressure on gold prices. The increase in yield marks a sell-off in the bond market, which in turn, denotes a building optimism among market participants over the improving economy. The sell-off in the bond market signifies a high-risk appetite of market participants and high return expectation from other asset classes.

However, the signs of improvement could not take gold below its recent low of 1286.10 as an array of weak data prevented gold prices from a drastic fall, and in turn, created a dilemma among market participants over the future of gold prices and overall global economic health.

The U.S. Core Retail sales dropped to -0.4% for March 2019, against the market expectations of 0.4%.  The U.S. Retail sales figures, which were at -0.2%, as compared to the market expectation of 0.3%, also suggested weak sales in the U.S. domestic market and prevented a sharp decline in gold prices.

In an expanding economy, a high-manufacturing should be supported by high sales as well, with one indicator above the expectation and one below the expectation of the market participants left the gold prices hanging in the range of $1289 to 1294.

To further gauge the direction of gold prices, the investors and speculators are keeping a hawk-eye on Durable Goods Orders data and weekly Unemployment claims from the U.S. and Caixin Services PMI data from China; both the data are due for till this week.

Apart from the data, the market participants are also eyeing on the development between ongoing U.S-China trade talks, in which delegation from China is revisiting Washington for another round of trade talks to resolve the bilateral disagreement between two significant economies.

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