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Gold continues to shine after economic data

Tuesday, June 04, 2024

Today’s headlines

What’s happening: Gold prices moved higher on Monday, as investors assessed the latest economic reports.

What happened: Downbeat economic data from the US increased prospects of the Federal Reserve slashing interest rates later this year.

The US dollar declined to a three-week low versus its major peers, making the yellow metal more attractive for foreign currency holders.

Why it matters: Gold prices recovered on Monday, from a two-week low of $2,330 recorded in the prior session, following soft economic data from the US. The yellow metal traded within 3.5% of its record highs.

Data released on Monday showed manufacturing activity in the US had eased for a second month in a row, while US construction spending also showed an unexpected decline amid lower non-residential activity.

The ISM manufacturing PMI unexpectedly declined to 48.7 in May, compared to April’s reading of 49.2. The figure also missed market estimates of 49.6. Construction spending in the US declined by 0.1% from the prior month to an annual rate of $2,099 billion for April, versus a 0.2% decrease in March. However, markets were expecting a 0.2% gain in spending.

The US dollar moved lower, lending support to gold on Monday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, declined 0.4% to 104.14 on Monday. The index had fallen to 104.13 earlier in the session, the weakest level since mid-May.

Traders widely expect the US central bank to cut interest rates in September. Lower rates reduces the opportunity cost of holding non-yielding gold.

The European Central Bank is expected to cut interest rates by a quarter point to 3.75% at its upcoming meeting on Thursday.

Gold for August delivery added $23.50 to close at $2,369.30 per ounce on Monday, after recording gains last week.

In other metals trading, silver for July delivery climbed 34 cents to $30.78 per ounce and July copper gained 7 cents to $4.67 per pound. Platinum fell to $1,022.8, while palladium settled sharply higher at $926.70.

What to watch: Investors now await the release of ADP employment data, due on Wednesday, and non-farm payrolls report from the US, scheduled for release on Friday. Private businesses in the US, which added 192,000 workers to their payrolls in April, are expected to add 173,000 jobs in May. Analysts expect the US economy to add 190,000 non-farm jobs in May, compared to a 175,000 gain in April.

The markets today

The Canadian dollar will be in focus today ahead of the Bank of Canada’s interest rate decision

Context: The CAD/USD forex pair edged lower this morning, after hitting a two-week high in on Monday.

Details: Data released on Monday showed a slowdown in manufacturing activity in Canada. The S&P Global Canada manufacturing PMI fell to 49.3 in May, compared to April’s reading of 49.4, signalling a contraction in the country’s factory activity for the thirteenth straight month.

Traders widely expect the Bank of Canada to cut its key interest rate by 25 basis points on Wednesday, to lend support to the economy.

Another decline in the price of crude oil, one of Canada’s major exports, exerted pressure on the loonie. WTI crude oil futures fell around 0.5% to trade at $73.87 a barrel this morning. US crude oil futures also dipped 3.6% to settle at $74.22 a barrel on Monday.

Some weakness in the US dollar index limited the overall losses for the CAD/USD forex pair. The US dollar index slipped around 0.1% to 104.05 this morning.

The CAD/USD forex pair fell 0.1% to 1.3641 this morning, after climbing to 1.3604, its highest level since May 20, on Monday.

The S&P/TSX Composite Index declined by 0.68% to settle at 22,116.69 on Monday, while Canada’s 10-year government bond yield was down to an eight-week low.

What to watch: Investors await the Bank of Canada’s interest rate decision on Wednesday. Canada’s central bank, which kept its key rate unchanged at 5% in April, is expected to cut rates to 4.75%.

Data on services PMI and composite PMI, due to be released on Wednesday, will also remain in focus. Analysts expect the S&P Global services PMI to increase to 49.7 in May, from 49.3 in April, while composite PMI is projected to rise to 49.6 in May, from April’s 49.3.

Other Markets: US trading indices closed mixed on Monday, with the S&P 500 and Nasdaq 100 up by 0.11% and 0.35%, respectively, and the Dow Jones index down by 0.30%.

The news shaping the markets

Italy will be sending a second SAMP/T air defence system to help Ukraine in its war with Russia. The news sent the RUB/USD pair lower in forex trading this morning.


Thailand’s S&P Global manufacturing PMI rose to a reading of 50.3 in May. The region’s manufacturing activity expanding for the first time in ten months lent support to the THB/USD forex pair.


Ireland’s AIB manufacturing PMI rose to 49.8 in May, compared to April’s nine-month low of 47.6, which sent the EUR/USD pair higher in forex trading this morning.


UK’s retail sales grew by 0.4% year-over-year in May, compared to a 4.4% decline in the previous month, which lent support to the GBP/USD forex pair.


South Korea’s annual inflation rate slowed to 2.7% in May, versus 2.9% a month ago. However, the KRW/USD pair fell slightly in forex trading this morning.

What else to watch today

France’s government budget value, Spain’s unemployment change, Germany’s unemployed persons, unemployment change and jobless rate, Brazil’s gross domestic product and IPC-Fipe inflation and balance of trade, South Africa’s GDP growth rate, Mexico’s gross fixed investment, US Redbook index, number of job openings, factory orders, RealClearMarkets/TIPP economic optimism index, number of job quits, Logistics Manager’s Index, total vehicle sales and API’s crude oil inventories, Argentina’s tax revenue, as well as Eurozone’s inflation expectations over the next 12 months.


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