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Gold Down, Economic Data Supports Dollar 

Gold prices continued to fall on Wednesday in Asia’s commodities. Robust U.S. data and optimism in economic recovery supported the dollar.

Gold futures traded 0.35% lower to $1,972 by 12:25 PM ET (5:25 GMT). The dollar inched up 0.03% to 92.365.

Prices of the precious metal slid back down to below $1,980-mark. This was after a small peak the day before. Gold prices marched towards $2,000 on Monday owing it to the dollar’s decline to multiyear lows.

But the better-than-expected U.S. manufacturing data restored hopes for economic recovery. For August, the ISM manufacturing Purchasing Managers Index (PMI) came at 56. It was above the predicted 54.5 and better than the 54.2 in July.

Bob Haberkorn, senior market strategist at RJO Futures said, the manufacturing number came out much better than expected. That’s what caused gold to pare back its gains and this gave little strength to the dollar.

Similarly on Tuesday, China and Japan showed an uptick in manufacturing.  In China, the Caixin manufacturing PMI for August rose from 52.8  to 53.1 in July. Japan’s manufacturing PMI went from 45.2 to 47.2 in August.

 

Gold will Remain Supported

With that, the dollar remained weak on inflation expectations this week. It was hovering below 92.5 and analysts believe gold will remain supported in the near term.

Haberkorn said, the better data doesn’t necessarily change the picture for the U.S. Federal Reserve.  He also said that the trend in gold is still higher.

Meanwhile, oil remains in consolidation, even with crude prices edging a little higher in energy commodities today. The consolidation occurs around the 200-day moving average, with both Brent and WTI stalling around these levels.

It’s interesting that, at this point, there seems little sign of a breakout to the upside or significant correction seen.

It rather appears to be in limbo with OPEC+ monitoring the situation month by month. The outlook remains unclear.

These consolidations are typically temporary, but these aren’t normal circumstances. A break above $44 in WTI may trigger some interest again, like a move below $41.50 may.

However, that can’t be said with any real confidence, particularly in reference to the former. That’s given how any momentum has just disappeared.

Elsewhere, in commodity news,  heavy Canadian crude rose after a spill. This led to the shutdown of a pipeline that supplies diluent to two major oil-sands sites in Alberta.

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