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25 Jul 2014
Good economic data setting gold up for a leg lower – TD Securities
FXStreet (Łódź) - Mike Dragosits, Senior Commodity Strategist at TD Securities, observes thatanaged to set up gold for a leg lower, despite the ongoing geopolitical tensions.
Key quotes
“China provided a nice boost to base metals across the board on Thursday with the flash release of the HSBC manufacturing index moving further into expansionary territory at 52.0 vs 50.7 last month. This signals to us that targeted stimulus measures are having a positive effect on the economy and should continue to tighten up base metals markets.”
“Meanwhile in the US, we've seen positive results from existing home sales for June, initial jobless claims, and July indicators of the Richmond and KC Fed manufacturing activity both strengthened.”
“This sets us up nicely for further strength going into next week's payrolls and FOMC meeting, where expectations are gaining traction that the Fed will continue to upgrade its growth outlook for the US economy.”
“This could put us on a course towards a potentially more hawkish outcome in the September meeting, should the economy maintain its current trajectory. This also lends support to base metals, but has particularly pulled the rug from under the gold market on Thursday.”
“With gold prices moving back into the cluster of moving averages, we're nearing a break down lower once again. The final stop before much lower prices, down into the $1,250/oz area, is the 200dma at ~$1,285/oz.”
“Next week's employment report could just be the catalyst we need to finally shift prices sharply lower, as has been our long held directional bias.”
“If we can outshine consensus and print closer to the 300K jobs mark again, gold will be well on its way to our target for gold prices of $1,250/oz for the Q4-2014 average and $1,235/oz for Q1-2015.”
Key quotes
“China provided a nice boost to base metals across the board on Thursday with the flash release of the HSBC manufacturing index moving further into expansionary territory at 52.0 vs 50.7 last month. This signals to us that targeted stimulus measures are having a positive effect on the economy and should continue to tighten up base metals markets.”
“Meanwhile in the US, we've seen positive results from existing home sales for June, initial jobless claims, and July indicators of the Richmond and KC Fed manufacturing activity both strengthened.”
“This sets us up nicely for further strength going into next week's payrolls and FOMC meeting, where expectations are gaining traction that the Fed will continue to upgrade its growth outlook for the US economy.”
“This could put us on a course towards a potentially more hawkish outcome in the September meeting, should the economy maintain its current trajectory. This also lends support to base metals, but has particularly pulled the rug from under the gold market on Thursday.”
“With gold prices moving back into the cluster of moving averages, we're nearing a break down lower once again. The final stop before much lower prices, down into the $1,250/oz area, is the 200dma at ~$1,285/oz.”
“Next week's employment report could just be the catalyst we need to finally shift prices sharply lower, as has been our long held directional bias.”
“If we can outshine consensus and print closer to the 300K jobs mark again, gold will be well on its way to our target for gold prices of $1,250/oz for the Q4-2014 average and $1,235/oz for Q1-2015.”