Chinese Manufacturing Stats Wreaks Gold

Fundamentals

Gold futures have turned negative this morning after weak economic data from China. The Chinese PMI number showed a slowdown in manufacturing in the month of March, which would be the fifth consecutive monthly decline. The poor economic number offset China lowering reserve requirements for some banks, adding liquidity to the monetary system. Commodities as a whole have seen weakness lately, lowering many market observers' expectations for inflation. Energy markets have weakened on concerns that stockpiles in the US are rising and in light of the economic risks facing China and Europe. Signs of economic stability to go along with increases in liquidity could turn things around for the Gold market; otherwise, we could see prices continue to drift lower.

Technical Notes

Turning to the April Gold chart, we see prices consolidating after breaking through support at the 1680 level. The next area of support comes in between 1600 and 1615. A violation of this support suggests prices may test the 1550 level on the downside. It is interesting to note that the momentum indicator is moving down at a much sharper pace than price and RSI, hinting at further weakness in the near-term.