Gold slips ahead of euro PMI data, second virus wave fears cap losses
· Gold eased on Tuesday on expectations of positive manufacturing data from the euro zone, but concerns over a second coronavirus wave kept the safe haven metal near its highest level in more than a month.
· Spot gold was down 0.2% at $1,750.75 per ounce by 0324 GMT after hitting its highest since May 18 at $1,762.84 on Monday. U.S. gold futures eased 0.2% to $1,763.70.
· “We’re seeing a little bit of profit taking ahead of the PMI data. Positive data could be a mood shifter and lend more support to the V-shaped recovery,” said Stephen Innes, chief market strategist at financial services firm AxiCorp.
Economists expect the euro zone composite flash PMI to rise to 42.4 in June from 31.9 last month as European economies gradually reopen. US manufacturing data is also due at 1345 GMT.
“However, going forward we are going to see more government and central bank stimulus added to the punch bowl just to see the market through this second wave, which should be supportive for gold,” Innes said.
· Gold has gained about 15% so far this year, supported mainly by lower interest rates and widespread stimulus measures by global central banks to ease the economic blow from the pandemic, since the non-yielding metal is considered a hedge against inflation and currency debasement.
· New infections spiked in Latin America, in Brazil in particular, while New York City, the epicenter of the U.S. outbreak, eased restrictions on Monday after 100 days of lockdown.
· Asian shares seesawed following confusing statements from the White House over the U.S.-China trade deal, with President Donald Trump later clarifying the pact was “fully intact”.
· Technical analysis
Gold prices moved higher closing above trend line resistance which comes in near $1,745, at a fresh 7-year high. This is now short term support. Additional support on the yellow metal is seen near the 10-day moving average at 1,731. Short term resistance is seen near the May highs at $1,765. Short term momentum has turned positive as the fast stochastic generated a crossover buy. The current reading on the fast stochastic is 87, above the overbought trigger level of 80 which could foreshadow a correction. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).
· Elsewhere, palladium fell 0.6% to $1,927.57 per ounce, platinum dropped 0.5% to $817.77. Silver slipped 0.6% to $17.72 after hitting a more than one-week high on Monday.
Reference: CNBC, FX Empire
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