The gold market is getting hit hard in action on Thursday following significant weakness in the overnight session. The primary drivers behind the selling include weak data out of China, a higher dollar index and some corrective trade after recent gains. An apparent stall in U.S./China trade talks is not doing the market any favors either.
The Chinese economy continues to show signs of slowing as industrial output came out lower than expected. According to MarketWatch, the latest reading on industrial output rose by 5.3% in the January-to-February period, indicating a slowdown from the December year-over-year reading of 5.7%. Consensus estimates were reportedly looking for a rise of 5.5%.
Retail sales were higher by 8.2% over the same period last year and steady from December’s reading.
Ongoing concerns over the health of the globe’s second-largest economy continue to keep a lid on risk appetite. Although the benchmark S&P 500 appears poised to challenge the 2800 level, stocks may have a difficult time putting together further upside if the recent trend of Chinese weakness remains intact.
According to CNBC, President Donald Trump said on Wednesday that he is in no hurry to complete a trade pact with China. Intellectual property protections seem to be a major sticking point in the ongoing negotiations, and there is thus far no date set for Trump and Chinese Leader Xi Jinping to meet. The ongoing tariff war is having a measurable effect on the economies of both nations, and the issue could potentially crimp demand for raw commodities.
The gold market is seeing some solid selling pressure today as prices are down $11.47/oz at $1296.03. The market has seen a sharp decline in recent sessions as some longs were quick to fold after the market failed to maintain upside momentum. Recent weakness has driven prices back below previous key resistance around the $1,300 area and likely triggered sell-stops and sell-signals. The market did see a bounce off of the week’s lows, however, in what could be eager bargain hunters stepping into the market. Renewed upside momentum in the dollar index is likely having a major impact on the gold price, and the market needs to hold previous support around the $1280 level to avoid another leg lower. If the market cannot hold that level, the 200- day moving average around $1250 may find plenty of willing buyers.