Gold traded below a 15-month high on Wednesday as the US Dollar strengthened after two Fed policy makers pointed to two interest rate hikes this year. Atlanta Federal Reserve President Dennis Lockhart said two rate hikes this year are certainly possible. Also, San Francisco Fed President John Williams said he is optimistic about the US economy and was giving little weight to the slowdown in first quarter gross domestic product. Assets of SPDR Gold Trust, the world's top gold-backed exchange-traded fund, increased to their highest since December 2013 on Monday.
New Zealand's first quarter employment data showed unemployment rose as the participation and employment rate also increased. The unemployment rate ticked higher to 5.7% in the reported period, from a revised 5.4% the prior quarter and above the forecast of 5.5%. Despite the increase in unemployment, the data suggested the economy was performing well. The participation rate advanced to 69.0% while employment rose 1.2%. However, of those entering the labour force 10,000 failed to find jobs, while the remaining 28,000 were employed. The cost of labour index rose 1.8% on an annualized basis in the March quarter, up from 1.6% in the three months through December. From the fourth quarter to the first quarter, labour cost grew 0.4%, in line with the prior quarter. In the March quarter, New Zealand's inflation climbed 0.4% on year, meaning real wages are still growing at a strong pace, which is likely to continue to boost consumption. The RBNZ is expecting annual inflation at 1.1% by end-2016, down from the forecast of 1.6% made at its December policy review, and just inside its 1% to 3% target range. Meanwhile, New Zealand house prices continued to rise at a solid pace in April with low interest rates supporting demand for housing. Residential property prices rose 12% year-on-year in New Zealand last month.
The US manufacturing sector expanded at a more moderate pace in April, partly due to a slowdown in new orders, but an increase in export orders to the highest level in more than a year offered hope for the sector. The Institute for Supply Management reported its index of factory activity slid to 50.8 last month, down from 51.8 in March. Despite the decline, April marked the second consecutive month of expansion and was the second highest reading in the last eight months. The US manufacturing sector has been struggling due to a strong US Dollar and moribund global demand. In addition to that, lower oil prices have derailed manufacturers tied to the energy industry. Separately, the Commerce Department reported construction spending rose 0.3% in March to its highest level since October 2007, following an upwardly revised 1.0% gain in February. The US economic growth slowed to a 0.5% annualized rate in the first three months of the year. The revised February construction spending figures appeared to be much higher those used in the advance first-quarter GDP estimate. Economists predict GDP growth for the first three months of the year will be revised up to a 0.7% rate. Given a fairly strong labour market, which is anticipated to underpin tepid consumer spending, economists expect gross domestic product growth to rebound in the second quarter.
Upcoming fundamentals: US data in focus
Gold eases for first time in seven days
The bullion failed to set another 15-month record yesterday, after American session was largely marked by the Greenback's rebound. Gold futures closed the trading around 1,286.50, but weakness is at risk of prolonging through the next 24 hours of market activity. The key support is placed at 1,272.92, namely the weekly pivot point, followed by the second demand precisely $20 below it (monthly PP). Dips lower are unlikely, also given that the mentioned monthly pivot is additionally backed by the April 29 low.SWFX traders are turning bearish again
Spreads (avg,pip) / Trading volume / Volatility
Market participants foresee the price of gold at 1,275 by the end of August
Traders who were asked regarding their longer-term views on gold between April 4 and May 4 expect, on average, to see the metal around 1,275 by the end of August. Generally, 65% (+2%) of participants believe the price will be above 1,250 in ninety days. Alongside, 27% (-2%) of those surveyed reckon the price will trade in the range between 1,100 and 1,250 over the next three months.