Gold Whimpers, Big Day for Japanese Data

Gold broke below $1200 in a wave of selling ahead of quarter end. The euro was the top performer while the yen lagged. In the upcoming session Japan releases a full slate of data including CPI, employment and retail sales.  2 new Premium trades in USDJPY were added today ahead of a flurry of Japanese data. 2 of 3 USDCHF longs hit all targets while the 3rd went 2 pips away from its final 0.9490 final target. 1 EURUSD is in progress as are 2 AUDUSD shorts. The remaining GBPUSD long was stopped out.

Gold fell hard for the second day, breaking $1200 which is said to be a key level for producers. Below that price, many gold miners become unprofitable and will shut down. That will eventually damper supply but in the near term flows will dominate and the drastic fall in gold this quarter could force more selling ahead of Friday's close.

Technically, the zone around the mid-2010 low of $1157 offers some technical support. Oversold conditions may also promote a rebound but from this point rallies are likely to be sold.

Economic news on Thursday focused on the Fed. Speakers including Dudley, Powell and Lockhart took a similar stance. They emphasized the conditionality of tapering, saying it won't happen if the economy misses forecasts. They also criticized the outsized market reaction.

Markets were listening – the S&P 500 gained 0.6% and 10-year yields fell 6 bps to 2.47%. The dollar retained a bid but it may have been due to month-end demand from Europe.

Economic data pointed to a middling US economy. Jobless claims, consumer spending and PCE inflation were virtually in-line with forecasts. Given the 1.8% growth in Q1 and tracking estimates for Q2 around 1.7%, that means the US economy will need to grow at a 3.1% pace for the remainder of the year to meet the Fed's 2.45% full-year forecast. That's a pace only reached once in the past 13 quarters.

Up next is a massive set of data from Japan. It starts at 2330 GMT with May household spending, employment and CPI numbers. Twenty minutes later it's industrial production and retail sales.

The data will offer a good look at early returns from Abenomics and the BOJ's latest QE program.