The gold market is seeing a little selling in early action today. A stronger than expected Philly Fed index reading may be the culprit. The index hit a reading of 17, stronger than the Empire State index. The better reading could have markets breathing a sigh of relief as concerns have been mounting over the potential for a further slowdown.
The Data
The latest reading of the Philly Fed index rose to 17 from a reading of 9.1 the previous month. Estimates were looking for a reading of 10. Although the shipments index saw a slight decline, the new orders index rose by 8 points to a reading of 21.3.
Mixed Signals
The manufacturing sector has been the subject of significant concern in recent months. A slowdown in U.S. manufacturing along with weaker data coming out of China has fueled the narrative of an increasing global slowdown and could even factor into the Fed’s plans regarding interest rates in the months ahead.
The Empire State Manufacturing index, released Monday, declined to a reading of 3.9 for its worst showing since May 2017. Today’s stronger Philly Fed reading, however, may temper some concerns about a major slowdown. According to reuters.com, the stronger Philly Fed reading could be “suggesting resilience in the region’s manufacturing sector amid trade tensions between China and the United States.”
Market Reaction
The gold market was grading relatively unchanged prior to the release and then saw a slight downtick once the figures were out. In recent trade, the spot gold price was down $.03 per-ounce at $1291.56. Although stocks are mixed in early action, the stronger data may be fueling some appetite for risk and easing demand for perceived safe haven asset classes.
The gold market is still hovering near key upside resistance. Although today’s stronger than expected manufacturing data has taken some wind out of the market’s sails, any significant dip will likely be aggressively bought. The bulls will be looking for gold to crack a fresh leg higher in the sessions ahead, and a failure to do so could potentially set the stage for a larger pullback.
Gold Price Chart
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