Gold futures extend losses after French PMI data

Gold futures were lower during European morning hours on Thursday, adding to losses as the U.S. dollar strengthened further after data showed that manufacturing activity in France tumbled to a three-and-a-half year low in September, fuelling concerns over the outlook global growth. Earlier in the session, preliminary data from China showed that manufacturing activity in Asia’s largest economy contracted for the 11th consecutive month in September. On the Comex division of the New York Mercantile Exchange, gold futures for October delivery traded at USD1,760.45 a troy ounce during European morning trade, shedding 0.5%. Earlier in the session prices fell by as much as 0.65% to trade at a session low of USD1,758.45 a troy ounce. Gold futures rose to as high as USD1,779.25 a troy ounce on Wednesday, the strongest level since February 29. Gold prices were likely to find short-term support at USD1,751.95 a troy ounce, the low from September 18 and resistance at USD1,792.25, the high from February 29. Prices fell to the lowest levels of the session following the release of worse-than-forecast purchasing managers' survey from France, the euro zone’s second largest economy. France’s manufacturing PMI fell to 42.6 in September from a final reading of 46.0 in September. Analysts had expected the index to come in at 46.4. Service sector activity in France declined to a four-month low of 46.1 in September from a final reading of 49.2 in August. Meanwhile, fresh concerns over the outlook for growth in China were fueled by data showing that the nation’s HSBC Flash Purchasing Managers Index rose slightly to 47.8 in September from a final reading of 47.6 in August. Despite the modest uptick higher, manufacturing activity in China remained in contraction territory for the 11th consecutive month, adding to fears over a deeper-than-expected slowdown in the region’s largest economy. A deeper slowdown in China, the world’s second biggest economy, would impair a global expansion that is already faltering because of the euro zone’s ongoing debt crisis. Sentiment also remained vulnerable amid ongoing uncertainty over whether the Spanish will ask for help from the European Central Bank's new bond-purchasing program, which would mean signing up to a permanent bailout fund. Markets were eyeing an auction of 10-year Spanish government bonds later in the day, as it was expected to be an important test of investor appetite for the country’s debt. The risk-off trade environment prompted investors to pile in to the relative safety of the U.S. dollar, with the euro dropping to a one-week low against the greenback. The dollar index, which tracks the performance of the U.S. dollar against a basket of six other major currencies, was up 0.55% to trade at 79.60, the strongest level since September 13. A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies. Elsewhere on the Comex, silver for December delivery retreated 0.8% to trade at USD34.31 a troy ounce, while copper for December delivery tumbled 1.75% to trade at USD3.748 a pound.

Courtesy: ForexPros