Like many other assets, the Gold trade has been a rather straightforward one against the USD. If the USD goes up, everything else goes down, including Gold and vice versa. Yesterday we saw a jump in Gold immediately after the 75 bps rate hike from the FED, which sent XAU/USD around $25 higher to $1,670.

But the press conference from Powell sounded hawkish and Gold is finding itself under pressure yet again. Gold has fallen to $1,616, which means losing more than $50 since last evening. So, we have turned bearish on this asset and decided to open a sell Gold signal after the retrace higher following the weaker US ISM manufacturing numbers. Gold jumped around $15 higher, but the 20 SMA (gray) stopped the surge on the H1 chart as shown on the chart above and we decided to sell Gold, which is reversing back down now.

US October ISM Manufacturing Report

• October ISM services PMI 54.4 points vs 55.5 expected
• Lowest since May 2020
• Prior was 56.7 points

Details:

• Prices paid 70.7 points vs. 68.7 last month
• Employment 49.1 points vs. 53.0 last month
• New orders 56.5 points vs. 60.6 last month
• Supplier deliveries 56.2 points vs. 53.9 last month
• Inventories 46.4 points vs. 44.1 last month
• Backlog of orders 52.2 points vs. 52.5 last month
• New export orders 47.7 points vs. 65.1 last month
• Imports 50.4 points vs. 51.3 last month

Look at that drop in ‘new export orders’. There are increasingly-widespread indications that the strong US dollar is biting into the trade. There’s clearly a turn lower in this survey but the Fed won’t like that bump in prices paid.

Comments in the report:

• “Despite the negative inflation news, higher gas prices and concerns of a recession, our restaurant sales have been resilient during what is typically a seasonal slump. We are positive to 2019 (pre-coronavirus pandemic), and traffic is down only about 4 percent, so it’s recovering. Staffing and supply chain challenges are improving, (and we are) seeing some decline in key commodities.” [Accommodation & Food Services]
• “Business remains tepid. We have a general concern that sales volumes are trending down as buyers communicate that they’re planning to buy only what they need for immediate sales.” [Agriculture, Forestry, Fishing & Hunting]
• “Customers are starting to delay projects and/or entering smaller-scale scopes of work. We believe this is a continuation of an uncertain economic environment.” [Construction]
• “There are supply chain challenges for some paper- and tech-related products.” [Educational Services]
• “Shortages and delays stabilizing. Labor availability and patient volume continue to be a challenge.” [Health Care & Social Assistance]
• “Electronic components lead times are becoming longer, pushing out almost a year. Not seeing much change in pricing based on inflation pressures at this point, but we expect to see changes after the first of the year. Business volume remains strong.” [Other Services]
• “As we prepare for a recession, our stakeholders, clients and vendors are all tightening their belts and reducing new spend. We are focusing on strategic renewals and expanding only where necessary with our closest vendor partners for our most critical tech projects.” [Professional, Scientific & Technical Services]
• “Prices seem to continue increasing for commodities, including plumbing, flooring materials, floor adhesives, door locks, and bedroom and bathroom doors. Delays in delivery have increased after leveling off in the middle of the year.” [Real Estate, Rental & Leasing]
• “We are in the final preparations for a successful holiday, despite lower sales. Labor is more available this year, and supply chain delays seem caught up for now.” [Retail Trade]
• “It has become more challenging to maintain our level of service, due to increased demand, extended supplier lead times and the hyper-competitive employment market.” [Transportation & Warehousing]
• “We are experiencing a bullwhip of oversupply on some goods … while still desperately short on other goods. The market is recovering very inconsistently.” [Wholesale Trade]

Gold XAU Live Chart