Gold intermarket: DXY/US yields drive gold down towards previous US data lows

Gold is struggling as the DXY picks up the pace post the FOMC that have swept the poor data under the carpet which the market views as hawkish while being upbeat on the jobs markets still.

Here are the main takeaways from the FOMC were as follows:

• Fed keeps rates unchanged at 0.75%-1.00% as expected.
• The decision was unchanged and unanimous.
• Slow down in GDPQ1 is viewed as transitory.
• Expects the economy to grow at a moderate pace.
• Fundamental consumption growth remains solid.
• Economy roughly balanced.
• Household spending up modestly.
• 12-month inflation running close to its 2% goal.
• Fed repeats it maintaining balance-sheet reinvestment strategy.
• Fed expects the economy to warrant gradual rate hikes.
• core inflation continued to run somewhat below 2%.
• Job gains solid.
• The labour market continued to strengthen as growth slowed.

US data was positive for today

The Institute for Supply Management said its non-manufacturing purchasing managers’ index climbed to 57.5 in April from 55.2 in March, besting median forecasts of 55.8. Earlier, the ADP report was good enough as a prelude to solid nonfarm payrolls on Friday with 177,000 new positions for the month beating the expectations of 175,000. 

Intermarket notes:

DXY is now up 0.11% having traded in a range of 98.89-99.17 so far for today. Gold, on the other hand, is now down 0.72% having traded between 1,245 - 1,257 and continuing on its southerly trajectory. However, the lows today were not from this FOMC meeting, but the US data and yields, although higher on the back of the FOMC statement are still only just above the psychological 2.3% mark in the 10-year. The range today has been wide, between 2.2767-2.3144, the high coming from post-Fed volatility of course. Should yields pick up, as one might expect and break out of the recent range and above 25th April highs at 2.3322, 1275 could be a reasonable target for the yellow metal. 

As stated in an earlier report, "Gold needs to get back to 1280 in order to reemerge in the bullish channel from 1197 and mid-March business, but will only be a bullish position when above the 20th March commencing trend lines high of 1295."

The French debate is next up on the hour, ahead of this weekend's runoff between Le Pen and Macron as an additional risk after the nonfarm payrolls event on Friday. The latest polls have centralist Macron leading by around 20 percentage points, over the far-right candidate Marine Le Pen.

• French election: Is the market too comfortable with a Macron win?
• Visit the French Elections Page here!
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