Gold Hit by Dollar Recovery

The US dollar managed to advance against a basket of major currencies alongside rising equity valuations for a second session, while the yield on 10-Year US Treasury note touched the highest point since May 16^th. Investor fears that central banks in the US and Europe are increasingly shifting towards a more hawkish posture has pushed yields higher, which decreases the demand for non-interest bearing gold and other risk aversion assets.

June and July are typically seen as middling months for bullion, with the spot metal rising by an average of 1.00% between 2007 and 2016. On the daily chart, gold is currently exhibiting strong support around $1210 per troy ounce. However, considering the more bearish backdrop and the intermediate term trend downwards, any break below $1210 could see prices continue to decline towards $1180.

 

Factory activity in the Euro Area ended the first half of 2017 by accelerating to its fastest rate of expansion in more than six years as rising prices failed to weaken orders.  The IHS Markit's Manufacturing PMI unveiled on Monday for the common currency area increased to 57.4 in June from a May reading of 57.0. Last month’s figure was the highest since April 2011, and easily surpassed the 50-mark that separates growth from contraction.

What was even more important from an investor standpoint was that new orders grew at their fastest pace since early 2011.  When accompanied by the recent depletion of raw materials at factories, the figures suggest the growth momentum is likely to continue into the second half of the year. EURUSD is flat early Tuesday, trading just above the key support at 1.1350.