UPDATE: Gold Slips From Highs, Awaiting Friday’s Data

Thursday August 1, 2013 10:43 AM

(Kitco News) - Gold prices slipped from their overnight highs and are pivoting around the unchanged area Thursday as traders jockey for position ahead of Friday's important U.S. July employment data.

At 10:33 a.m. EDT, most-active December gold futures on the Comex were down 30 cents an ounce at $1,312.30. Other precious metals markets were firmer, but off session highs. September silver rose 2.7 cents to $19.650. Nymex September palladium rose $3.35 to $729.70, and October platinum gained $9.50 to $1,438.80.

Gold prices started the North American session higher on the back of a relatively dovish statement from the Federal Open Market Committee released late Wednesday. The market started to pull back and then was weaker following the release of a stronger-than-expected U.S. manufacturing report.

The Institute of Supply Management said Thursday that its July manufacturing index rose to 55.4 from 50.9 in June, the highest level since August 2011. This was also above analyst expectations.

Slightly offsetting the ISM data was the unexpected drop in June construction spending. The Commerce Department said Thursday construction spending fell 0.6% in June, versus analyst expectations for a rise. May spending was upwardly revised to 1.3% from an initial figure of a 0.5% rise.

The U.S. dollar, which was already firm ahead of the data, rose following the economic news, as did equities. Equities were also strong out of the gate, with the Standard & Poor's 500 stock index reaching 1,700 for the first time. Other indexes such as the Dow Jones Industrial Average and the Nasdaq Composite were also firmer.

The ISM data came in very strong, said CIBC World Markets. "That included a huge 65.0 reading for the production index, and strong readings for employment and new orders. Prices paid were, oddly enough, on the soft side, with the index dipping below 50. But otherwise, the huge headline jump told the story well... Market reaction will key on the pleasant surprise in the ISM, taking bond yields higher, supporting cyclical equities and the U.S. dollar," they said.

Charles Nedoss, senior market strategist with Kingsview Financial, said there seems to be "two camps" of traders out in the gold market Thursday, those who are selling it based on stronger economic data and those who are buying it based on no talk of tapering of the Fed's quantitative easing program in Wednesday's FOMC statement.

"We could flush this market down to $1,300, but it's encouraging to see it hold," Nedoss said.

He noted the December futures are holding near the 10-day and the 50-day moving averages, which come in around $1,321.80 and $1,325.30, respectively. For bulls to gain the upper hand, they need a close above the 50-day moving average, he said.

Nedoss said he doesn't want to read too much into Thursday's price action given that the sentiment in the market could change if Friday's U.S. jobs data comes in different than expectations of 175,000 jobs created.

"What we're seeing is some jerking around of the moving average. People are positioning for tomorrow," he said.

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Read the latest news in gold and precious metals markets at Kitco News.

By Debbie Carlson of Kitco News;

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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