Gold is moderately lower on profit taking, in the face of good economic data in the U.S. and Europe and a slightly stronger dollar.
U.S. stocks are mostly flat, as good earnings reports from Apple and Boeing are offset by disappointing reports from Caterpillar and AT&T. The Markit flash factory PMI for July came in at 53.2, the highest number in four months, and an improvement in June’s 51.9. The Markit flash PMI is usually higher than the ISM factory PMI, due for release next week, but investors use it as a bellwether.
New home sales in the U.S. in June hit the highest rate in nearly 5 years, as homebuilder confidence continues to increase. This news help support the dollar, along with some short covering. Oil futures are still near a 14-month high, which is positive for gold.
Commerzbank says gold is receiving support from different areas right now. They believe the April swoon in prices was overdone, and primarily driven by speculators. They also believe that there will be no sudden end to the Fed’s bond buying program, and that this is working to devalue the dollar. Analysts think that if gold can show some resilience at this level, it will encourage fence-sitters to buy instead of waiting for another price drop. One last positive for gold is that HSBC has chopped its estimate for Q2 growth in the U.S. in half, from 2.1% to 1.1%.
Speaking of HSBC, their July PMI report for China last night showed economic contraction speeding up, at 47.7 versus 48.2 in June, an 11-month low. Some believe that this may goad the Chinese government into stimulus measures. The government had already announced its plans for “targeted” stimulus while it continued to fight the overcapacity and corruption in various industries. Chinese stocks slid .5% on the news.
Hong Kong stocks were barely up, .2% for the day, to ink a fourth day of gains. The Nikkei was down slightly on the economic news out of China.
In Europe, both German and French manufacturing activity was reported on the rise, as the Eurozone Markit PMI recorded its first expansion since January 2012. The composite PMI came in at 50.4, compared to 48.7 in June. German factory output improved, while French output shrank at a slower rate, giving hope that the recession there may be ending. Euro stocks were up 1%, and the euro currency touched a one month high to settle around 1.326.