The gold price inched higher during Asian trading hours on Tuesday as the US dollar hit a 15.5-month low on Tuesday following weaker-than-expected US data.
Spot gold was last at $1,294.50-1,294.80 per ounce on Tuesday, up $1.90 from Monday’s close. Trading ranged at $1,289.70-1,297.10 so far.
“US dollar weakness is the main driver of the gold rally. How much higher gold can go may be in part dependent – in the short term at least – on how weak the US dollar will trade. If the US dollar continues to slide, gold is likely to gain,” said James Steele, chief precious metals analyst at HSBC.
Spot gold had risen above $1,300 on Monday before succumbing to profit-taking.
But the US dollar is not the only potential driver of gold, said Steele. “We note more technical and momentum-based players in the market on gold’s bull side. These same participants have been out of the market for some time and their entrance into gold may be a fresh source of buyers. That said, momentum and technical traders can also shift gears quickly if the US dollar rallies or gold’s upside stalls,” he added.
The US dollar index sank to a 15.5-month low of 92.46 on Tuesday following the release of softer-than-expected US data on Monday. The index was last at 92.48, down 0.6 percent from Monday’s close.
On Monday, the Institute for Supply Management (ISM) reported that its manufacturing index fell to 50.8 percent in April from 51.8 percent in the prior month, and below forecast of 51.6.
On Tuesday, the China’s April Caixin manufacturing PMI came in at 49.4, below the forecast of 49.8 and March’s 49.7.
The PMI signalled further marginal deterioration in operating conditions in April with all of the index’s categories indicating worsening month-on-month conditions, said Caixin Insight Group.
“The fluctuations indicated the economy lacks a solid foundation for recovery and is still in the process of bottoming out. The government needs to keep a close watch on the risk of a further economic downturn,” said He Fan, chief economist at Caixin Insight Group.
Over the weekend, China released its official April manufacturing PMI which read 50.1, down from 50.2 in March and missing the 50.3 forecast. But it was still above the 50-point mark that separates expansion in activity from contraction.
It is a light day for data with mainly the US IBD/TIPP economic optimism and total vehicle sales due later today.
In commodities, the Brent crude spot price fell 2.8 percent to $46.02 per barrel, and the Texas light sweet crude spot price fell 1.96 percent to $44.98 so far on Tuesday.
In equities, the Shanghai Composite is so far up 1.2 percent to 2,973.441 on Tuesday.
In other precious metals, silver fell $0.182 to $17.61/$17.635. Platinum increased $8 to $1,080/1,085, and palladium was up $4 to $620/626 recently on Tuesday.
On the Shanghai Futures Exchange, gold for June delivery was unchanged at 270.45 yuan per gram and June silver was flat at 3,825 yuan per kilogram.
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Source: Bullion Desk News
