Steady Gold Price on “PMI Day”

June 1st, 2016 by

The spot gold price was steady around $1,215/oz on Wednesday morning, giving up some early morning gains. Much of the attention in the markets will be trained on the slew of Purchasing Managers’ Index (PMI) data being released today around the world.


Regional and national PMI data usually has a significant impact on the affected markets. PMI is generally seen as a measure of the overall health of the manufacturing sector, the bedrock of most economies.

factoryBased on production numbers, new factory orders, current inventory levels, new supplier deliveries, and surveys of the overall employment environment, PMI is measured on a scale of 0 to 100 where 50.0 represents stability (or stagnation, depending on how you interpret it). Recent reading haven’t been encouraging.

Many of the world’s largest economies are reporting their PMI statistics on Wednesday, including the U.S. later in the morning. Both the U.K. and China showed an essentially flat reading at 50.1 for their PMI while the eurozone saw its reading fall to 51.5—a sign of modest growth, but still lower than the previous month.

Abenomics Pauses

PM Shinzo Abe

PM Shinzo Abe

The dollar was about 0.5% weaker on Wednesday, which was largely attributable to a firmer Japanese yen. The Japanese currency rose due to the news that Prime Minister Shinzo Abe, who has tied his legacy to the unconventional economic program known as “Abenomics,” was postponing a planned sales tax hike. The new target date for the 2% increase to the country’s consumption tax (to 10%) will be October 2019.

Unfortunately for Abe, the country still sports the world’s heftiest debt burden. Delaying the sales tax won’t help contain this trend and is seen primarily as a political move with elections upcoming. Worse still, Japanese consumers are still mostly unwilling to ramp up their spending with such uncertainty surrounding the world’s third-largest economy.

Gloomy OECD

global crashDespite Wednesday’s subdued action, the precious metals may get a lift in the wake of pessimistic comments by the Organization for Economic Cooperation and Development (OECD). Due to loose monetary policy around the globe and the potential disruption of a “Brexit” (i.e. the U.K. withdrawing from the European Union), the OECD has again downgraded its outlook for global economic growth in 2016. The organization’s secretary-general bemoaned that we’re seeing 2% to 3% growth around the world when it ought to be closer to 7%, using language like “mediocre” and “rather dismal” to describe the situation.

The OECD, which is based in France, will release its official semi-annual Economic Outlook report today at 10:30 am (Paris time).

Technical Analysis

Source: The Guardian (U.K.)

Source: The Guardian (U.K.)

Gold and silver each fell from their early morning highs, fueled by short-covering and bargain-hunting. While silver traded steady around $16/oz, both platinum and palladium were slightly lower.

It would appear that the strongest support levels for the gold price are at $1,208/oz (Tuesday’s low) and the psychologically important $1,200/oz mark. Meanwhile, resistance can be seen at $1,216/oz and $1,220/oz above that.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

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