Today, traders should focus on the key zones of 2345 and 2360 for gold prices. The US dollar plummeted at the start of the week, driven by weakness in the ISM manufacturing data, which subsequently took Treasury yields lower. In response, gold prices rose by just over 1%, reaching $2,354 an ounce due to the drop in both the dollar and yields. The increasing signs of weakness in US demand are becoming more evident.
The headline ISM manufacturing index remained in contraction for the second consecutive month, recording a reading of 48.7 in May, down from 49.2 in April and below the expected 49.5. New orders also saw a significant decline, dropping to 45.4 from 49.1, while the employment sub-index showed a return to expansionary territory at 51.1, up from the previous 48.6. Further dovish signals emerged from the Prices Paid component, which slipped to 57.0 from 60.9, falling short of the expected 58.5.
Today's focus shifts to the JOLTS job openings report, which will provide insights into whether the consumer pullback might extend further. A significant change in job openings could signal more extensive impacts on the economy.
In China, the Caixin manufacturing PMI expanded to 51.7 in May from 51.4 in April, marking the fastest pace of growth since July 2022. This signals a mixed recovery in China, following indications of softness from the official PMIs released last week.
The larger-than-expected contraction in the ISM manufacturing index, coupled with a decline in new orders and slowed production, highlights the restrictive nature of current monetary policy and its braking effect on economic activity. Additionally, weaker-than-expected construction data further underscores the impact of monetary policy on the broader economy.
As the market processes these economic indicators, gold prices are likely to remain influenced by the fluctuating dollar and Treasury yields, alongside key data releases. Traders should remain vigilant and consider these dynamics when making their decisions.