Investing.com - Gold and copper drifted weaker in Asia on Thursday as a key measure of China manufacturing showed a dip into contraction in May.
Gold futures for June delivery on the Comex division of the New York Mercantile Exchange fell 0.20% to $1,2769.47 a troy ounce. Also on the Comex, copper futures fell 0.50% to $2.537 a pound.
China's Caixin manufacturing PMI for May came in at 49.6, marking an 11-month low and slipping into contraction as it missed a level of 50.1 seen.
"China's manufacturing sector has come under greater pressure in May and the economy is clearly on a downward trajectory," Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in a note accompanying the Caixin survey.
Demand faltered in May as total new orders fell to 50.3 - the lowest level in 11 months - from the previous month's 51.0. The rate of expansion in new export orders also weakened significantly, showing only marginal growth.
On Wednesday China reported official manufacturing PMI for May at 51.2, compared with a level of 51.0 seen, and steady with 51.2 in April. The non-manufacturing PMI came in at 54.5, up from a level last at 54.0 in April. A figure above 50 denotes expansion.
Overnight, gold edged higher on Wednesday, as signs of weakness in the U.S. economy spurred safe haven demand after both manufacturing and housing data fell short of expectations.
Gold prices remained on track to snap a two-day losing streak, as investors piled into safe haven gold amid a downturn U.S. Midwest manufacturing and pending home sales.
The Chicago Purchasing Management Index, also known as the Chicago Business Barometer, fell to 55.2 in May from its strongest level in more than two years. Analysts had expected a reading of 57.0 for May.
In a separate report, The National Association of Realtors said U.S. pending home sales, a forward looking measure of US home sales, fell 1.3% in April, as tightening in the number of homes available for sale continued to weigh on U.S. pending home sales.
The soft duo of economic results came ahead of the release of the Federal Reserve’s Beige Book, a report on current economic conditions in each of the 12 Federal districts in the U.S, which serves as a prelude to the Federal Open Market Committee meeting in June.
Geopolitical uncertainty and a continued slide in dollar, has emboldened demand for safe haven gold, despite rising expectations that the Federal Reserve is poised to hike interest rates in June.
According to investing.com’s Fed rate monitor tool over 80% of traders expect the Fed to hike its benchmark rate in June from 0.75-1% to 1-1.25%.
Gold is sensitive to moves higher in both U.S. rates and the dollar – A stronger dollar makes gold more expensive for holders of foreign currency while a rise in U.S. rates, lift the opportunity cost of holding non-yielding assets such as bullion.