Market Overview: Gold prices are slightly lower in early trade today as some profit taking and consolidation are seen following strong upside on Friday. The gold bulls appear to be in form control, and the market looks poised to challenge the Brexit highs around $1380 per ounce. Investors are also likely still digesting Friday’s much weaker than expected GDP data, which showed second quarter growth of just 1.2 percent.
Key Data Points: The PMI Manufacturing Index showed a significant gain this morning, registering a reading of 52.9. While the report is nothing to write home about, it did contain several positives with the rise in export orders being at the top of the list.
The ISM Manufacturing Index saw a decline from its previous reading, registering a reading of 52.6. The new orders index was quite positive, with a reading of 56.9 that could point to future employment strength.
Construction Spending for June saw a decline of .6 percent, while consensus estimates were looking for a gain of .2 to 2.2 percent. This decline follows two recent months of sizable declines and could be a potential cause for concern.
Outside Markets: Stocks are slightly lower in early trade today as investors continue to ponder the likelihood of another interest rate hike this year. Last Friday’s disappointing GDP data is likely weighing on sentiment today, while weaker oil may also be driving some degree of risk aversion.
Crude oil is lower again today and is approaching the $40 per barrel level. A breakdown below this level could potentially send stock investors running for the exits, as concerns over energy stocks may once again weigh heavily on equity markets and investor sentiment.
The dollar index is seeing a slight bounce today after getting hammered on Friday. If the idea of another rate hike this year continues to fade, the dollar could come under additional selling pressure and could potentially boost interest in gold and other precious metals.
The Big Picture: Gold looks solid from a technical standpoint, and the path of least resistance appears to be higher. Upside in gold may, however, be somewhat limited if equities continue to climb. That being said, August may be a slow month for stocks and other asset classes as many investors take time off before fall. The notion of the Fed holding off until 2017 for the next rate hike may be constructive for stocks, and for now the path of least resistance is still higher. Gold has performed well given the recent ascent in equities, however, in what could be construed as a sign of underlying strength.
