Weak U.S. data a reminder why gold remains in demand

Weak U.S. data a reminder why gold remains in demand

Picture of Ole Hansen
Ole Hansen

Head of Commodity Strategy

Summary:  Gold has been challenged this week following the break below $1485/oz. Weak economic data has however reminded the market why gold has been and most likely will continue to be one of the best performing markets in 2019 and beyond.


Gold has so far responded very well to the challenge it faced on Monday when the price broke below support at $1485/oz. Instead of triggering a cascade of sell orders from speculators holding a record long in COMEX futures the price ‘only’ managed a move down to $1460/oz before finding support. As we highlighted in our latest Weekly Commodity Update the market was looking tired towards the end of last week and in need of a test lower to gauge its strength.

Silver led the way with the sell-off not running out of steam before it reached $17/oz, a 50% retracement of its June go early September rally.

A surprisingly weak U.S. September ISM manufacturing survey that came in well south of 50 was all it took to remind the market why gold has rallied so far during the past few months and why it is likely to continue higher over the coming months.

The PMI survey release of 47.8 vs. 50.0 expected, the lowest since the last recession ten years ago, triggered a run on fresh USD longs while the S&P 500 and bond yields both dropped. Growth dependent commodities such as copper and oil traded lower while gold and to a lesser extent silver – given its industrial metals link – moved higher.

Several weak economic data points from around the world has returned the focus to the ongoing synchronized global slowdown. Adding to this slowdown is a worry that the resumption of trade talks between the U.S. and China later this month will fail to yield a breakthrough.

With economic data in focus the attention now turns to Thursday's U.S. non-manufacturing ISM, the only data that really matters for Q3 GDP as household consumption represents about 70% of the US economy. Therefore clearly a much better gauge to assess the real state of economic activity. The week concludes with the monthly U.S. job report and following these two key data points a weekly close above or below $1485/oz will give a very good idea about where the yellow metal goes next. 

What we have witnessed so far this week, from a technical perspective, has been a weak correction within a strong uptrend. While the first key level of support at $1450/oz was not challenged a quick return above $1485/oz could now attract additional buying from those who had been holding out for a bigger correction.

More on gold, silver and platinum in our Q4 Outlook which can be found on www.analysis.saxo from tomorrow.

02OLH_Gold1
Source: Saxo Bank

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.