Market Overview: The gold market is seeing some solid gains today as risk aversion heading into the weekend and technical buying are featured. The notion of additional central bank stimulus measures are also likely adding fuel to the fire as the uncertainty surrounding Brexit may prove to be a significant drag on economic activity and investor sentiment. The gold bulls are in firm control at this point, and further upside in gold prices appears likely at this point.
Key Data Points: The final PMI manufacturing Index registered a reading of 51.3, basically unchanged from the flash reading. This figure suggests activity is growing at a very modest pace.
The latest ISM Manufacturing data showed a reading of 53.2 while consensus estimates were looking for a reading of 51.5. While this reading is better than expected, it is still nothing to write home about and points to only modest manufacturing activity.
The latest readings on Construction Spending were quite weak for the month of May. Consensus estimates were looking for a gain of .6 percent, however, the reading actually came in at .8 percent. Construction spending also points to an improving housing market, although improvement is being seen at a gradual and modest pace.
Outside Markets: The broad market S&P 500 is moving higher again today, and has quickly recovered significant ground following the losses seen right after the Brexit vote. With the market sitting just below the 2100 level, a challenge of previous highs could potentially be in store.
Interest rates are on the decline today, even as some risk appetite appears to be present. The idea of further easing by central banks may keep rates lower for longer and could potentially drive more buying in stocks.
The dollar index is pulling back further today from the recent highs seen following Brexit. The dollar still remains vulnerable to further selling, and a significant breakdown in the greenback could be another bullish factor for gold and precious metals.
Crude oil is a little weaker today, but remains near the $50 per barrel mark.
The Big Picture: Gold appears headed for more upside as ongoing risk aversion and the idea of further central bank easing drive buying interest. While stocks have recovered, it remains unclear how Brexit may affect global financial markets and this could keep some degree of risk aversion in the marketplace. A challenge of gold’s recent highs could be in store in the coming sessions, and a breakout above those highs could potentially see a large and prolonged leg higher in the yellow metal.
