Base metals hold on to gains, gold price and dollar weaker

Otmane El Rhazi from The Bullion Desk.

The base metals put in a strong performance yesterday with average gains of 2.1 percent led by a 3.5 percent gain in nickel to $13,925 and a three percent gain in copper to $6,133.50. The weaker dollar and some better US economic data, which supported the view that the first quarter weakness was temporary, led o further short-covering judging by the tightness in many of the spreads where four out of six of the base metals have cash-to-threes that are backwardated.

Precious metals fell sharply, down an average of 1.5 percent, led by a 2.8 percent drop in silver to $16.10 and gold fell 1.8 percent to $1,183.70. The pullback was triggered by the better US initial jobless claims data and the price weakness happened despite the weakening dollar. The fact bullion is struggling to take advantage of the weaker dollar, shows investors’ interest remains weak.

This morning the base metals are consolidating and are showing little change, which is a sign of continuing strength after yesterday’s show of strength. Copper and aluminium are off just 0.2 percent and lead is off 0.1 percent, while the rest are unchanged. Copper is last at $6,306. Volume has been light with 1,718 lots traded, but China and many other Asian markets are closed for May Day holidays.

Precious metals are mixed, silver has rebounded 0.5 percent to $16.18, the gold price is off 0.1 percent to $1,182.10 and the PGMs are little changed.

Markets in Shanghai are closed – so there will be some catching up to do on Monday should LME prices avoid correcting.

Equities – the Euro Stoxx 50 was little changed yesterday, although German bunds started to fall, which may well be on the back of hopes that negotiations with Greece run more smoothly now. Equities in the US, however, were lower with technology stocks leading the decline – the Dow was off 1.1 percent while he Nasdaq was off 1.6 percent.  In Asia this morning, the Nikkei is off 0.2 percent.

Currencies – the dollar continues to look weak, the dollar index is last at 94.99, it did reach a low of 94.39 early yesterday, but then found some underlying support especially after the US data. The euro reached 1.1266 yesterday, but is last at 1.1202, sterling is easing, last at 1.5340 after a high of 1.5498 on Wednesday, the yen is weaker at 119.75, the aussie has slipped too, last at 0.7895, the rouble is at 51.32, while the yuan is at 6.2018. With the dollar now very focused on US data in the run up to June’s FOMC meeting, we should expect a volatile period ahead.

The economic agenda is busy – China’s manufacturing PMI came in at 50.1, non-manufacturing PMI slipped to 53.4, Japan’s manufacturing PMI edged higher to 49.9, but household spending dropped 10.6 percent and CPI was mixed. Later we get UK manufacturing PMI, money supply and lending data and US data includes two sets of manufacturing PMI, University of Michigan consumer sentiment and inflation expectations, construction spending and total vehicle sales -  see table below for more details. Italy, Germany and France are closed for May Day holidays.

The base metals have a tailwind behind them with the weaker dollar a catalyst for firmer prices, which seems to have triggered short-covering and some seasonal buying. The rising tide is lifting all boats in the metals’ complex although the likes of lead and zinc are looking increasingly overbought in the short term so some red flags should be out. If we see further evidence of better US data then the US dollar could put in a rebound and that in turn could pour cold water on the metals’ rallies. For now the momentum is to the upside so we would expect further gains, especially those that have only recently started to rally, but we would be on the lookout for signs of producer hedge selling and profit-taking.

The precious metals are surprisingly weak, the gold market just does not seem to want to rise above $1,215, a few days ago a June Fed rate rise was all but off the table and few bits of better US data yesterday seems to have changed that mind set amongst bullion traders – we still feel the Fed will remain on hold for longer and expect the dollar correction to last longer too. As such, we feel gold may well have some catching up to do, especially if equities correct and investors are in need of a safe-haven.  

 

Overnight Performance
BST	06:43	+/-	+/- %	Lots
Cu	6306	-10	-0.2%	1091
Al	1916	-4	-0.2%	238
Ni	13925	0	0.0%	144
Zn	2341	0	0.0%	188
Pb	2112.5	-2	-0.1%	57
Sn	15925	0	0.0%	0
Steel	395	0	0.0%	Total
	Average (BM ex-Steel)		-0.1%	1,718
Gold	1182.1	-1.6	-0.1%
Silver	16.18	0.08	0.5%
Platinum	1141.9	0.9	0.1%
Palladium	776.8	-0.2	0.0%
	Average PM		0.1%

 

		Economic Agenda
BST	Country	Data	ACTUAL	Expected	Previous
12:30am	AUS	AIG Manufacturing Index	48.00		46.30
12:30am	Japan	Household Spending y/y	-10.6%	-11.7%	-2.9%
12:30am	Japan	Tokyo Core CPI y/y	0.4%	0.5%	2.2%
12:30am	Japan	National Core CPI y/y	2.2%	2%	2%
12:30am	Japan	Unemployment Rate	3.4%	3.5%	3.5%
All Day	China	Bank Holiday
2:00am	China	Manufacturing PMI	50.10	50.00	50.10
2:00am	China	Non-Manufacturing PMI	53.4		53.70
2:30am	AUS	PPI q/q	0.5%	0.2%	0.1%
2:30am	Japan	Average Cash Earnings y/y	0.1%	0.4%	0.1%
2:35am	Japan	Final Manufacturing PMI	49.9	49.8	49.7
All Day	France	French Bank Holiday
All Day	Germany	German Bank Holiday
All Day	Italy	Italian Bank Holiday
7:30am	AUS	Commodity Prices y/y			-19.7%
9:30am	UK	Manufacturing PMI		54.60	54.40
9:30am	UK	Net Lending to Individuals m/m		2.6B	2.5B
9:30am	UK	M4 Money Supply m/m		0.10%	-0.2%
9:30am	UK	Mortgage Approvals		63K	62K
2:45pm	US	Final Manufacturing PMI		54.20	54.20
3:00pm	US	ISM Manufacturing PMI		52.1	5150.0%
3:00pm	US	Revised UoM Consumer Sentiment		96.10	95.90
3:00pm	US	Construction Spending m/m		0.01	-0.001
3:00pm	US	ISM Manufacturing Prices		42.30	39.00
3:00pm	US	Revised UoM Inflation Expectations			2.5%
All Day	US	Total Vehicle Sales		16.9M	17.2M

 

 

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Comex gold price sinks on stronger-than-forecast US data

Otmane El Rhazi from The Bullion Desk.

Gold prices fell sharply in the US on Thursday after data supported the Federal Open Market Committee’s (FOMC) claim that slowing growth in the first quarter was a temporary phenomenon.

Gold for June delivery on the Comex division of the New York Mercantile Exchange was last down $30.60 at $1,179.40 per ounce. Trade has ranged from $1,176.00 to $1,207.40.

US unemployment claims came in at 262,000 – the lowest level since 2000 and below the forecast 297,000. The Chicago PMI rose 6.0 points to 52.3 in April, the highest since January and further from February’s low.

“The decline was on the unemployment claims – that might have shifted opinion in the bullion market on the timing of the rate rise,” HSBC analyst James Steel said in a telephone interview.

But the “market overreacted” to today’s positive data, Steel added.

The numbers follow first-quarter advance GDP growth of 0.2 percent, which missed the expected 1.0 percent and was down from 2.2 percent in the fourth quarter of last year.

But the FOMC, which released a statement on monetary policy last night that stressed the importance of data in its decision when to raise interest rates, attributed slowing economic growth during the winter months and a moderating pace of job growth partly to “transitory factors” such as bad weather.

“The bounce back in activity at the start of second quarter is consistent with a resumption of normal activity following the poor weather and port strikes earlier in the year. In percentage terms, the April jump is similar to last year, although the level of activity is lower overall,” Philip Uglow, chief economist of MNI Indicators, said.

In US equities, the Dow Jones industrial average and the S&P were down 0.5 percent and 0.6 percent respectively. The euro was 0.4 percent stronger at 1.1178 against the dollar.

In eurozone data earlier in the session, the core CPI flash estimate met forecasts of 0.6 percent but the overall unemployment rate for March came in at a higher-than-expected 11.3 percent.

The Germany unemployment change for March was 8,000, missing the forecast 14,000, while the Italian monthly unemployment rate increased to 13 percent, above the predicted 12.6 percent.

In the other precious metals, Comex silver for May delivery was down six cents at $16.00 per ounce. Trade has ranged from $15.815 to $16.70. Platinum for June delivery on the Nymex fell $27.70 to $1,133.80 while the most actively traded palladium contract was at $777.7, up $5.25

Light sweet crude (WTI) futures rose $0.66 or 1.1 percent to $59.26 per barrel in the most active contract.

(Editing by Mark Shaw)

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Gold endures heavy sell-off, price close to 2-mth low

Otmane El Rhazi from The Bullion Desk.

Gold continued to sell off heavily on Thursday afternoon while investors grappled with the more hawkish tone taken by the US Federal Reserve over normalising monetary policy.

The spot gold price was last at $1,180.20/1,181 per ounce, down $24.40 on the previous session’s close and having traded close to its lowest in two months at $1,176.90 earlier in the day.

Similarly, silver fell through support at $16 to hit an intraday low of $15.82 per ounce though it has since recovered to $16.02/16.07, down 53 cents.

In the PGMs, platinum hit an intraday low of $1,130 before settling at $1,131/1,136 per ounce, down $18, while palladium was last $6 lower at $772/777.

Gold slipped on the Fed’s assertion that the US economic slowdown might be due to temporary factors that could dissipate and even reverse later in the year. This in turn would clear the path for an interest-rate increase, several analysts noted.

But for now gold remains one of few commodities not benefitting from a dollar that earlier hit its lowest in two months against the euro at 1.1250 and 94.39 against the basket of currencies, also a two-month low.

The greenback clawed back some ground – it was last at 1.1160 – after the release of better-than-expected US data earlier in the session. US unemployment claims came in at 262,000 – the lowest level since 2000 and below the forecast 297,000.

In eurozone data earlier in the session, the core CPI flash estimate year-over-year met forecasts of 0.6 percent but the overall unemployment rate for March came in at a higher-than-expected 11.3 percent.

The Germany unemployment change for March was 8,000, missing the forecast 14,000, while the Italian monthly unemployment rate increased to 13 percent, above the predicted 12.6 percent.

(Additional reporting by Dalton Barker, editing by Mark Shaw)

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Goldcorp Q1 gold output up 7pct but silver down 13 pct

Otmane El Rhazi from The Bullion Desk.

Goldcorp produced seven percent more gold in the first quarter of this year compared with the first three months of last yeasr but silver output dropped, it said.

The company produced 724,800 ounces of gold in the three months to the end of March, up from 679,000 ounces a year ago, but silver production fell nearly 13 percent to 8.5 million ounces compared with 9.6 million ounces.

It expects gold production to increase over 2015 as mining continues into the higher-grade portions of the Peñasco pit at Peñasquito and as both Cerro Negro and Éléonore ramp up through the year.

The company recorded a decline in adjusted quarterly profit for the first quarter at $12 million, down from $209 million, which it attributed to lower gold prices.

Its average realised first-quarter price on gold sales fell to $1,217 per ounce from $1,297 in the same period of last year.

 

(Editing by Mark Shaw)

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Gold dips as investors interpret FOMC meeting as ‘slightly hawkish’

Otmane El Rhazi from The Bullion Desk.

Gold prices declined in the early morning US trading period as yesterday’s Federal Open Market Committee (FOMC) hawkish tone continued to weigh on the yellow-metal.

Gold for June delivery on the Comex division of the New York Mercantile Exchange was last down $17.70 at $1,192.20 per ounce. Trade has ranged from $1,190.90 to $1,207.40 and is now below the 100-day moving average.

The members of the Fed’s policy board are locked in what’s become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008. The current market consensus is that the first hike will happen in the fourth quarter.

The FOMC said on Wednesday that economic growth slowed during the winter months, while the pace of job growth “moderated”, however, it placed some of the blame on “transitory factors” such as bad weather.

Gold slipped on the Fed’s assertion that the economic slowdown might be due to temporary factors that could dissipate and even reverse later in the year. This in-turn would clear the path for a interest rate increase, several analysts noted.

“The FOMC statement may have been interpreted as slightly hawkish by the gold market,” James Steel, an analyst at HSBC Securities, said. “Gold may remain weak in the near-term as the markets continue to digest the FOMC statement.”

In a particularly heavy data day, unemployment claims for Americans was 262,000 – the lowest level since 2000 – coming in under the 297,000 estimates.

In eurozone data, Core CPI flash estimate year-over-year met the forecast of 0.6 percent, while overall unemployment rate for March came in above estimates at 11.3 percent, with many pegging a 11.2 percent result.

In individual countries, Germany unemployment change for March was 8,000 with a forecast at 14,000. Meanwhile south, Italian monthly unemployment rate for March increased to 13 percent, missing the forecast of 12.6 percent.

“The focus for gold is still very much centred on the US – upcoming data prints will continue to be important as they feed into Fed policy expectations, and some volatility is to be expected around these releases,” Joni Teves, an analyst at UBS, said.

As for the other precious metals, Comex silver for May delivery was down seven cents at $15.92 per ounce. Trade has ranged from $15.91 to $16.70. Platinum for June delivery on the Nymex fell $25.10 to $1,136.40, while the most actively traded palladium contract was at $777.25, up $7.00.

Light sweet crude (WTI) futures rose $0.30 or 0.6 percent at $58.88 per barrel in the most active contract while the euro was less than a percent stronger against the dollar at 1.1136.

(Editing by Tom Jennemann)

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No direction in gold price for now but break lower looms – ANZ

Otmane El Rhazi from The Bullion Desk.

There is a distinct lack of a consensus view on gold at present but forthcoming US data will force gold down to $1,100, ANZ said.

“‘Lacking conviction’, ‘neutral’ or ‘waiting for a signal’ – any of those phrases can describe the apathy that seems to be permeating the gold market at the moment,” the bank said in a note on Wednesday.

Spot gold is currently trading around $1,202 per ounce, up around 1.2 percent from $1,189 at the start of the year. The metal has been confined to tight ranges of late while the market searches for a catalyst to move either side of $1,200.

But its next direction will depend on an evolution in US data that will ultimately play into the dollar’s hands, ANZ predicted.

Recently, US data has been subdued, making a delay to the normalisation of US monetary policy likely and pushing the dollar to its lowest in two months against the euro at 1.125 earlier today.

The US economy grew at an annual rate of 0.2 percent in the first quarter of this year, below the expected 1.0 percent and down from 2.2 percent in the fourth quarter of last year.

Still, ANZ expects gold to be at $1,100 by the end of June and $1,150 by September, although it has a full-year price forecast of $1,225.

A rebound in US non-farm payrolls to around 200,000 on May 8 is crucial, the bank said. Slack in the labour market, particularly the lack of wage growth, appears to have steadied the Fed’s hand in normalising rates so far.

“The market may look to this as the next catalyst to push gold out of its quagmire,” it said.

But the current hiatus in gold is also evident in the physical markets – premiums are weak across the major markets.

China’s imports of gold via Hong Kong fell to a seven-month low of 66 tonnes in March, though India’s imports last month at 134 tonnes were double the year-ago level.

“The strength in India’s imports is likely to be temporary though, as we are in peak demand season in India and it comes on the back of the lifting of import restrictions in December,” it said.

Demand for gold as a safe-haven asset is providing minimal support despite Greece’s debt woes and the country’s potential exit from the eurozone.

“But markets are also saying it is a Greece problem, not a Europe problem, but only the actual event occurring will test if this is the case. This remains on everyone’s radars, but so far contagion risk looks contained,” the bank added.

(Editing by Mark Shaw)

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Gold price remains under pressure from Fed’s change in stance

Otmane El Rhazi from The Bullion Desk.

The gold price was under pressure on Thursday morning – investors appear to have interpreted last night’s Federal Reserve’s statement on monetary policy as slightly hawkish, though movements remain thin.

Spot gold was last at $1,203.00/1,203.80 per ounce, down $1 on Wednesday’s close, having earlier tested support at $1,200. Silver was up seven cents at $16.60/16.65.

“The FOMC meeting had limited price impact on gold,” UBS’ Edel Tully said. “The fact that the Fed seemed less worried about the weak first-quarter GDP report than the market may have anticipated is slightly negative.”

The bank removed all references to calendar dates regarding when it may choose to raise interest rates, instead stressing the importance of data and the gradual reduction in slack in the labour market.

The US economy grew at an annual rate of 0.2 percent in the first quarter of this year, below the expected 1.0 percent and down from 2.2 percent in the fourth quarter of last year.

The FOMC attributed slowing economic growth during the winter months and a moderating pace of job growth partly to “transitory factors” such as bad weather.

Gold remains one of few commodities not benefitting from the dollar trading at its lowest in two months against the euro at 1.1234 and at 94.39 against the basket of currencies, also a two-month low.

“The precious metals should be heading higher given the dollar’s break lower; the fact they are not, at least not yet, shows that confidence in the metals is weak,” FastMarkets analyst William Adams said.

“It almost looks as though the market is looking for excuses not to rally, hence the market hanging on the Fed’s use of “transitory”. With equities looking weaker and the dollar declining, we would not be surprised if investors looking to protect their wealth, viewing gold as a ‘relatively’ cheap safe haven,” he added.

Gold also appears to have largely shrugged off this morning’s swathe of mixed data. German retail sales at -2.3 percent missed expectations at 0.5 percent as did the German unemployment change at -8,000, although the Spanish CPI at -0.6 percent and flash GDP at 0.9 percent bettered consensus.

The overall eurozone CPI and the unemployment rate are expected later and may bolster the euro if they beat forecasts.

This afternoon the US will release weekly unemployment claims, the employment cost index, the core PCE price index and personal spending figures.

The PGMs were modestly higher – platinum was last at $1,149/1,154 per ounce, up $1, while palladium was up $4 at $782/787.

(Additional Reporting by Dalton Barker, editing by Mark Shaw)

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Base metals latch on to dollar weakness, bullion not doing so yet

Otmane El Rhazi from The Bullion Desk.

Base metals tried lower on Wednesday but the sell-off did not gather momentum and for the most part the metals closed firmer – the exception being tin that dropped 1.1 percent – the others were up an average of 0.3 percent. The weaker dollar was one of the more supportive factors while a 0.2 percent rise  US GDP number was a disappointment and a weight on the dollar.

Bullion prices benefited from the weaker dollar, at least initially, but palladium was the only metal to hold on to gains, it rose 0.8 percent to $780, while the rest were lower by an average of 0.3 percent with gold closing at $1,205.20 – there is evidence of supply around the $1,214 level in gold, just ahead of the $1,215 neckline of a potential inverse head and shoulder pattern.

This morning the base metals are mixed – nickel leads on the upside with a 0.7 percent rise to $13,550, aluminium is up 0.2 percent, tin is down 0.4 percent, while the rest are little changed with copper at $6130 – volumes have been light with 2,601 lots traded.

Precious metals are weaker across the board with prices off an average of 0.3 percent – given the weaker dollar it is surprising prices are not rallying – perhaps too much expectations was already built into the price. We still feel gold’s engine is revving, but the handbrake is on.

In Shanghai, the June base metals contracts are mixed, but the bulk are firmer led by nickel that is up 1.4 percent, while tin is off 0.4 percent, aluminium is off 0.2 percent, lead and zinc are both up 0.3 percent and copper is up 0.5 percent at Rmb 44,210. Steel rebar is off 0.8 percent and iron ore prices have turned lower to $56.90 from a recent high around $59.20 and after a strong rebound through April.

Spot copper in Changjiang is up 0.5 percent to Rmb 44,300-44,420, the spread with the futures remains around an equivalent of $33 per tonne backwardation, while the LME/Shanghai copper arb ratio is at 1 to 72.5 suggests the arb window is closed.

Bullion prices in Shanghai are lower with gold off 0.5 percent and silver is off 0.6 percent.

Equities came under pressure yesterday with the Euro Stoxx 50 dropping 2.7 percent as the disappointing US GDP number hit sentiment, the Dow, S&P and Nasdaq closed off between 0.4 and 0.6 percent. Stocks in Asia are mixed, the Nikkei is off 2.6 percent, the Hang Seng is off 0.8 percent, the Kospi is off 0.6 percent, but the CSI 300 is bucking the trend with a 0.7 percent gain.

The dollar index broke key support at 96.16 yesterday to set a low at 94.67, in our view the dollar index is now trending lower as it undergoes a long overdue correction and with the FOMC now likely on hold until at least September, possibly for longer, we feel the market will realise the dollar had run ahead of the fundamentals. That said, whether other currencies should be rising is a moot point, but they are on the back of dollar weakness with the euro at 1.1095, sterling is strong as it goes into next week’s general election, it is at 1.5411, the aussie is at 0.7979, the yen is at 118.58, the yuan at 6.1988 and the rouble is flat at 50.70.

The FOMC statement suggested no rate rise in June, but their view that the economic weakness in the US was ‘transitory’ in nature left the door open for rate rises later in the year and that undermined the likes of gold. Today’s economic agenda is extremely busy, it started with Japan’s industrial production number dropping just 0.3 percent, it had been expected to fall 3.4 percent, while Japan’s housing starts were also better than expected, they climbed 0.7 percent.  Data out in Europe includes a range of unemployment and CPI data, German retail sales, French consumer spending, Spanish GDP, while US data includes initial jobless claims, personal spending and income, Chicago PMI and natural gas storage. In addition, FOMC member Daniel Tarullo is speaking – see table below for more details.

The base metals for the most part are still looking upwards with copper tackling resistance ahead of $6,200, indeed copper is the laggard. Aluminium and nickel are playing catch-up with lead and zinc that are holding up well after their strong gains since mid-March and tin is consolidating after its sharp rebound. The weaker dollar is likely to provide further strength in the short term, but the economic data out of the US, combined with global economic weakness are at the end of the day do not bode well metal demand.

The precious metals should be heading higher we would have thought given the dollar’s break lower, the fact they are not (at least yet) shows that confidence in the metals is weak. It almost looks as though the market is looking for excuses not to rally hence the market hanging on the Fed’s ’transitory’ word. With equities looking weaker and the dollar on the decline, we would not be surprised to see investors looking to protect their wealth viewing gold as a ‘relatively’ cheap safe-haven.  

 

Overnight Performance
BST	06:06	+/-	+/- %	Lots
Cu	6130	-3.5	-0.1%	1120
Al	1885.5	3.5	0.2%	288
Ni	13550	95	0.7%	661
Zn	2296.5	-3.5	-0.2%	454
Pb	2097	1	0.0%	77
Sn	15655	-70	-0.4%	1
Steel	395	0	0.0%	Total
	Average (BM ex-Steel)		0.0%	2,601
Gold	1202.7	-2.5	-0.2%
Silver	16.49	-0.07	-0.4%
Platinum	1149.4	-1.6	-0.1%
Palladium	777.5	-2.5	-0.3%
	Average PM		-0.3%

 

SHFE prices 06:22  BST		Change	% Change
Cu	44210	240	0.5%
AL	13310	-30	-0.2%
Zn	16950	55	0.3%
Pb	13765	40	0.3%
Ni	103920	1480	1.4%
Sn	116300	-520	-0.4%
Average change (base metals)			0.3%
Rebar	2259	-19	-0.8%
Au	241.3	-1.3	-0.5%
Ag	3601	-20	-0.6%

 

		Economic Agenda
BST	Country	Data	ACTUAL	Expected	Previous
12:50am	Japan	Prelim Industrial Production m/m	-0.3%	-3.4%	-3.1%
5:04am	Japan	Monetary Policy Statement
6:00am	Japan	Housing Starts y/y	0.7%	-1.8%	-3.1%
7:00am	Germany	German Retail Sales m/m		1%	0%
7:00am	Japan	BOJ Outlook Report
Tentative	Japan	BOJ Press Conference
7:45am	france	French Consumer Spending m/m		-0.5%	0.1%
8:00am	Spain	Spanish Flash CPI y/y		-0.7%	-0.7%
8:00am	Spain	Spanish Flash GDP q/q		0.8%	0.7%
8:55am	Germany	German Unemployment Change		-14K	-15K
9:00am	EU	ECB Economic Bulletin
9:00am	Italy	Italian Monthly Unemployment Rate		12.6%	12.7%
10:00am	EU	CPI Flash Estimate y/y		0.0%	-0.1%
10:00am	EU	Core CPI Flash Estimate y/y		0.6%	0.6%
10:00am	EU	Unemployment Rate		11.20%	11.3%
10:00am	Italy	Italian Prelim CPI m/m		0.20%	0.1%
1:30pm	US	Unemployment Claims		290K	295K
1:30pm	US	Core PCE Price Index m/m		0.20%	0.1%
1:30pm	US	Employment Cost Index q/q		0.6%	0.6%
1:30pm	US	Personal Spending m/m		0.6%	0.1%
1:30pm	US	FOMC Member Tarullo Speaks
1:30pm	US	Personal Income m/m		0.20%	0.4%
2:45pm	US	Chicago PMI		50.10	46.3
3:30pm	US	Natural Gas Storage		79B	90B

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Gold price lower despite weaker USD, quiet trade expected ahead of holidays

Otmane El Rhazi from The Bullion Desk.

The gold price fell following the keynote FOMC statement on Wednesday, as the Federal Reserve chose to remove the calendar reference for the eventual rate increase.

“The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its two percent objective over the medium term,” the Federal Open Market Committee report said.

The dollar index took a beating overnight, falling to its softest since end of February, as the release of US quarterly GDP numbers disappointed markets as well.

US advance GDP rose 0.2 percent, missing the forecast of 1.0 percent and down from the previous quarter’s downwardly revised 2.2 percent, while the advance GDP price index declined 0.1 percent – analysts had projected 0.5-percent increase.

The spot gold price was last at $1,204.40, slipping by about $1.20 from Wednesday’s close. Silver was $0.06 lower to $16.52 per ounce.

“The FOMC statement may have been interpreted as slightly hawkish by the gold market as prices fell by $7 to slightly over $1,200 per ounce…Gold may remain weak in the near-term as the markets continue to digest the FOMC statement,” said a report from HSBC Securities.

For tomorrow, a number of markets will be closed for 1 May labour holiday including Singapore, Hong Kong and China.

“Most Asian markets are closed tomorrow due to May Day, so expecting a

quiet day leading into the long weekend,” said a report from MKS Capital.

For the day ahead, the US weekly jobless claims data will continue to be monitored for any sign of lost momentum, as well as a string of data releases out of Europe – the first estimate of Euro area inflation for April will be out, March consumer spending reports will be released in Germany and France; whilst Spain will print Q1 GDP and the April CPI.

The other precious metals were slightly lower as well, with platinum slipping $3.50 to $1,150 per ounce and palladium $3 lower at $780.

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Gold, equities down on FOMC statement

Otmane El Rhazi from The Bullion Desk.

The Federal Reserve on Wednesday removed all calendar references in its forward guidance and said that recent economic weakness might be “transitory” in nature, which pushed equities and gold lower.

“The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its two percent objective over the medium term,” the Federal Open Market Committee report said.

The members of the Fed’s policy board are locked in what’s become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008. The current market consensus is that the first hike will happen in the fourth quarter.

“They took out the calendar references, so now [their policy] is entirely data dependent. That means that every meeting from here on is live. But this is a pretty downbeat assessment of the economy, so I would say that June is off the table,” CNBC chief economist Steve Liesman said.

The FOMC said that economic growth slowed during the winter months, while the pace of job growth “moderated”, however, it placed some of the blame on “transitory factors” such as bad weather.

Gold and equities slipped on the Fed’s assertion that the economic slowdown might be due to temporary factors that could dissipate and even reverse later in the year. This in-turn would clear the path for a interest rate increase, several analysts noted.

In the markets, gold futures for June delivery on the Comex division of the New York Mercantile Exchange fell to $1,203.7 per ounce, which is $4.80 lower than the pre-FOMC level.

The most-actively traded Comex copper futures contract fell by about one cent following the statement to $2.792 per pound, while light sweet crude (WTI) futures were at $58.75 per barrel, up $1.69.

In earlier data, US advance GDP rose 0.2 percent, missing the forecast of 1.0 percent and down from the previous quarter’s downwardly revised 2.2 percent, while the advance GDP price index declined 0.1 percent – analysts had projected 0.5-percent increase.

“Holy Weak Growth, Batman,” Sterne, Agee & Leach said in a note. “After back-to-back quarters of above trend growth in the second and third quarters of last year, activity has slowed in nearly every category, pushing GDP down to 2.2 percent at the end of last year and further still to just two-tenths of a percentage point across the first three months of 2015, resulting in significantly lower growth than expected.”

Some analysts have been quick to dismiss the weakness as transitory, resulting from one-off factors such as cold winter weather or port disruptions, but Sterne Agee believes there more at play.

“The widespread malaise across nearly every sector of the economy, not to mention the continued weakness in March and April data after the temporary issues were resolved, suggests fundamental weakness as opposed to Mother Nature is at the root cause of the economic decline,” the analysts said.

In the wider-markets, the dollar was 1.13 percent weaker at 1.1106 against the euro, while the Dow Jones industrial average and S&P were down 0.4 percent and 0.5 percent respectively.

(Editing by Tom Jennemann)

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Gold slips aheads of FOMC statement

Otmane El Rhazi from The Bullion Desk.

Gold prices consolidated on Wednesday even amid a sinking dollar and expectations that the Federal Open Market Committee (FOMC) will delay raising interest rates.

Gold for June delivery on the Comex division of the New York Mercantile Exchange was last down $4.30 at $1,209.60 per ounce. Trade has ranged from $1,1203.90 to $1,213.5.

The dollar index is at 94.968, down 1.2 percent today and the lowest price since late February as poor US data continues to flood the market. However, the yellow-metal is still trading within a tight range.

“Gold is trading in the range $1,180-$1,220 and probing the upper level of the range. A break on the upside could open further highs towards 1236.97 ahead of 1252.05, low of January 29,” Joni Teves, an analyst at UBS, said.

The Federal Open Market Committee will finish its two-day meeting Today and, according to the CME Group’s FedWatch, there is a zero-percent chance that the central bank will adjust rates. This should not be surprising given some high-profile headline misses recently, such as the US gaining only 126,000 jobs in March and consumer confidence coming in under forecast.

The odds are not much better for June, where the futures market only indicates a 2.14 percent chance of rates rising to 0.5 percent from 0-0.25 percent currently, according to CME data.

The CME Group FedWatch is based on 30-Day Fed Funds futures prices, which have long been used to express the market’s views on the likelihood of changes in US monetary policy.

September and October could be interesting – FedWatch puts the implied probability for a rate increase in those two months at 26 percent 43 percent respectively.

“Participants on the gold market will doubtless be watching this evening’s meeting of the US Federal Reserve with great interest, hoping for signs of when the Fed might begin its interest rate hikes,” Commerzbank said

In data, advance GDP and advance GDP price index for March came in under their forecast. Advance GDP rose 0.2 percent, missing the forecast of 1.0 percent, while the price index declined 0.1 percent – analysts projected a 0.5 percent increase.

In US equities, the Dow Jones industrial average and S&P were both down 0.7 percent.

Meanwhile in the Eurozone data, M3 Money supplies year-over-year beat the projection at 4.6, with a forecast of 4.3. Private loans year-over-year met projections at 0.1. In European equities, Germany’s DAX and France’s CAC-40 were both down 3.2 and 2.6 percent respectively.

As for the other precious metals, Comex silver for May delivery was up six cents at $16.66 per ounce. Trade has ranged from $16.385 to $16.685. Platinum for June delivery on the Nymex rose $2.8 to $1,161.40, while the most actively traded palladium contract was at $783.35, up $13.10.

Light sweet crude (WTI) futures increased $1.96 or 3.4 percent at $59.03 per barrel in the most active contract.

(Editing by Tom Jennemann)

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Gold price unmoved by tumbling dollar, FOMC in focus

Otmane El Rhazi from The Bullion Desk.

The gold price was indifferent to the dollar tumbling to its lowest in two months on Wednesday afternoon, holding steady ahead of this evening’s FOMC statement.

Spot gold was last at $1,210.00/1,211.80 per ounce, down $1 on Tuesday’s close. It has traded in a $10 intraday range so far even after the dollar fell two cents against the euro to its lowest in two months at 1.1178 after US data fell short of forecasts.

Advance GDP rose 0.2 percent, missing the forecast of 1.0 percent and down from the previous quarter’s downwardly revised 2.2 percent, while the advance GDP price index declined 0.1 percent – analysts had projected 0.5-percent increase. US pending home sales at 1.1 percent were as expected, however.

The market may be holding fire ahead of the communiqué that follows the Federal Reserve’s policy board’s two-day meeting. While no market-moving announcements are likely – the consensus for the first rise in interest rates since 2008 has shifted back to the second half of this year – observers will parse the language for clues to when it might start to normalise monetary policy.

In other data, the German CPI at -0.1 percent was largely as expected as were eurozone private loans at 0.1 percent although this was the first positive reading since 2012. M3 money supply at 4.6 percent bettered the forecast 4.3 percent.

Other metals fared slightly better – silver was last at $16.65/16.70 per ounce, up 10 cents, platinum at $1,157/1,162 was up $7 while palladium was $8 higher at $780/785.

(Editing by Mark Shaw)

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Gold down on CME ahead of heavy data day

Otmane El Rhazi from The Bullion Desk.

Gold prices fell in early morning US trading period ahead of the Federal Open Market Committee (FOMC) meeting and a slew of US data.

Gold for June delivery on the Comex division of the New York Mercantile Exchange was last down $4.30 at $1,209.60 per ounce. Trade has ranged from $1,1203.90 to $1,212.5.

“The gold price has not yet managed to rise significantly above the $1,200 per troy ounce mark. It is also continuing to hover around the 1,100 euros per troy ounce level in euro terms,” Commerzbank said. “Participants on the gold market will doubtless be watching this evening’s meeting of the US Federal Reserve with great interest, hoping for signs of when the Fed might begin its interest rate hikes.”

The Federal Open Market Committee will finish its two-day meeting Today and, according to the CME Group’s FedWatch, there is a zero-percent chance that the central bank will adjust rates. This should not be surprising given some high-profile headline misses recently, such as the US gaining only 126,000 jobs in March and consumer confidence coming in under forecast.

The odds are not much better for June, where the futures market only indicates a 2.14 percent chance of rates rising to 0.5 percent from 0-0.25 percent currently, according to CME data.

The CME Group FedWatch is based on 30-Day Fed Funds futures prices, which have long been used to express the market’s views on the likelihood of changes in US monetary policy.

September and October could be interesting – FedWatch puts the implied probability for a rate increase in those two months at 26 percent 43 percent respectively.

In data, advance GDP and advance GDP prince index for March came in under their forecast. Advance GDP rose 0.2 percent, missing the forecast of 1.0 percent, while Advance GDP price index declined 0.1 percent, while analysts projected 0.5 percent increase.

Meanwhile in the Eurozone, M3 Money supplies year-over-year beat the projection at 4.6, with a forecast of 4.3. Private loans year-over-year met projections at 0.1. In European equities, Germany’s DAX and France’s CAC-40 were both 1.2 and 1.5 percent respectively.

As for the other precious metals, Comex silver for May delivery was down one cent at $16.58 per ounce. Trade has ranged from $16.385 to $16.635. Platinum for June delivery on the Nymex fell $1.20 to $1,157.40, while the most actively traded palladium contract was at $777.0, up $6.75.

Light sweet crude (WTI) futures fell five cents or 0.1 percent at $57.01 per barrel in the most active contrac,t while the euro was 0.7 percent stronger against the dollar at 1.1054.

(Editing by Tom Jennemann)

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Potential Fed rate increase to weigh on silver in 2015 – CPM Group

Otmane El Rhazi from The Bullion Desk.

Silver prices are expected to consolidate in 2015 amid a burgeoning US economy and strengthening dollar, CPM Group in its annual Silver Yearbook released on Wednesday.

Silver struggled during 2014, failing to break over $22 per ounce during the first seven months and sliding lower during the second half of the year. The grey metal ended the year at $15.60, down 19 percent.

“These price levels were the lowest since 2010. Silver prices declined primarily due to shorter term investors who moved their funds out of not only silver but much of the commodities complex,” CPM noted.

Silver futures have recovered modestly in 2015, creeping up to $16.57. For the full year 2015, CPM expect the metal to average $16.93 in a range from $15.66 to $18.51.

Moving forward, one of the most anticipated and debated question in the global financial markets is when and by how much will the US Federal Reserve raise interest rates. The group does not expect the first hike to happen until until September, at the earliest.

“The potential for an increase in interest rates is expected to keep the US dollar at elevated levels, which could weigh on silver prices,” CPM Group said.

Conversely, an increase in interest rates could also force investors to take a macro outlook to the metal and discover increasing government debt mixed with declining revenue, the group added.

Investors are forecast to purchase 107.3 million ounces of silver in 2015. In 2014, market participants purchased 131.6 million ounces – down 13.6 percent from the previous year and the weakest demand since 2008.

Short term investors moved their capital elsewhere seeking faster returns, while long term participants added further long positions amid falling prices, the CPM Silver Yearbook reports.

The group argues that silver bulls retrenched their position by buying silver coins. US Mint silver coin sales reached 44 million ounces during 2014, up 6.1 percent over 2014 levels, a new record high.

On the supply side, mines are expected to produce 790.5 million ounces in 2015, a 1.1 percent increase over 2014. However, the secondary market will contract by 4.7 percent to 205 million ounces.

Meanwhile, silver fabrication demand is projected to rise 3.2 percent to 892.7 million ounces in 2015 from the 2014 level of 865.3 million ounces.

Jewellery – the largest end-user of silver – is projected to reach 295.9 million ounces in 2015, up 6.4 percent from 2014. Electronics is the second largest market for silver and is forecast to reach 225.8 million ounces, up around 1 percent from 2014 levels.

Demand from the solar panel industry is forecast to reach 76.7 million ounces in 2015, while demand from the photography sector, which has been in a long declining trend, is expected to slip to 72.5 million ounces in 2015 from 77.4 million ounces in 2014.

“The reduction of silver on a per unit basis was one of the many factors that made [solar] technology more affordable over the years,” the group said. “This in turn resulted in an increase in demand for solar panels, which more than offset the per unit reduction of silver in the panels.”

Investors are forecast to purchase 102.9 million ounces of silver in 2015, the group said.

“These purchases should prevent prices from declining significantly during 2015, but this level of investment demand most likely will not be strong enough to drive silver prices sharply higher,” the report added.

Silver exchanged-traded funds rose to 625.5 million ounces at the end of February, up 1.5 million ounces from the end of 2014. However, this is still down 10.8 million ounces added on a net basis during the same period a year prior.

“The relatively subdued demand for silver ETFs reflected investor concerns over a strengthening dollar against a basket of currencies and endless market speculation about the timing of the first interest-rate hike by the Federal Reserve since the 2008-2009 global financial crisis,” CPM Group said.

(Editing by Tom Jennemann)

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Gold price consolidates but further upside possible

Otmane El Rhazi from The Bullion Desk.

The gold price stepped back from Tuesday’s three-week high in Wednesday morning trading but further upside is possible ahead of US GDP figures and the FOMC statement.

The spot gold price of $1,207.80/1,208.50 per ounce was down $3.40 on Tuesday’s close and below that session’s peak of $1,215.00. It has traded in a narrow $5 intraday range so far.

“The investment climate appears to be stacking up more positively for gold. The dollar has been on the defensive to the euro since mid-April and expectations for a Fed rate hike, which presumably have been factored into the market, has been put off until later in the year,” HSBC’s James Steel said.

“While we may see some pullback in gold after a sharp 2-day run up after the FOMC statement, we detect moderately greater confidence in the bullion market,” he added.

Observers will scrutinise the FOMC statement due at the conclusion of its two-day meeting for clues as to when a US may choose to begin normalising monetary policy.

Slack in the labour market and stagnant inflation figures have previously steadied the Fed’s hand on raising rates and the predicted slowdown in GDP growth may well add to that. But analysts believe that the deflationary environment is easing, which may well prompt some comments from Fed chair Janet Yellen.

“Market participants are certainly expecting a dovish tone in the statement in light of the further weakness in economic indicators since the FOMC’s last meeting,” MKS’ Alex Thorndike said in a note. “With the rates market pricing the first full rate hike out of December and the USD Index testing its lowest level since early March, the market are probably well prepared for dovish overtones from the statement.”

The greenback is now at its lowest in three weeks against the euro at 1.10 and at a two-month low against the basket of currencies at 95.89.

The market is also focused on the US quarterly GDP growth figure. While the expected drop to 1.0 percent from 2.2 percent in the last GDP reading is largely priced in, anything below consensus may provide further upward impetus for gold as the dollar continues its retreat.

In other data, eurozone private loans at 0.1 percent were as expected but this was the first positive reading since 2012. M3 money supply at 4.6 percent bettered the consensus 4.3 percent. The German preliminary CPI and pending home sales are still to come.

Other metals were similar – silver at $16.49/16.54 per ounce was down six cents and below the three-week high hit in the previous session at $16.70. Platinum was last up $1.50 at $1,152/1,157 per ounce while palladium was unchanged at $771/776.

In PGMs news, first-quarter PGMs production at Aquarius Platinum, the world’s fifth-largest platinum producer, climbed six percent to 84,792 ounces.

(Editing by Mark Shaw)

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Metals’ rallies pause ahead of US GDP and FOMC statement

Otmane El Rhazi from The Bullion Desk.

 

The base metals put in a mixed performance yesterday, early strength that saw the complex up an average of 0.8 percent at the day’s highs went on to become quite mixed with aluminium up 2.2 percent to 1,874.50, copper closed up 0.5 percent at $6,127, while the rest pulled back by an average of 0.8 percent – jittery equity markets did not help confidence, but somewhat surprisingly a weaker dollar failed to provide a lift – the dollar index breached support at 96.16, setting a low at 96.01.

 

The precious metals did latch on to the weaker dollar as we thought it would – at the day’s highs the precious metals were up an average of 1.2 percent, with silver rising 1.8 percent to $16.71 at one stage. They ended the day up an average of 0.8 percent with the price of gold closing at $1,211.50.

 

This morning the base metals are for the most part easier with average losses of 0.3 percent. Tin is off 0.9 percent at $15,750, copper is off 0.6 percent at $6,088, while the rest are ranged between 0.1 and -0.1 percent. Volume on the LME has been light at 2,576 lots. This level of volume is normally seen when China is on holiday – which may well indicate how quiet trading is in China these days.

 

Precious metals this morning are mixed, palladium is up 0.4 percent at $777, platinum is up 0.2 percent, silver is unchanged and the price of gold is off 0.1 percent at $1,210.10. Platinum’s discount to gold is now at $55 per ounce.

 

In Shanghai, the June contracts are for the most part down, the exception is aluminium that is up 0.2 percent. The rest are down an average of 0.5 percent led by a 0.8 percent decline in tin, while copper is off just 0.1 percent at Rmb 43,970 – see table below for more details.

 

Spot copper in Changjiang is unchanged at Rmb 44,050-44,200, the spread with the futures is at a narrower backwardation of an equivalent of $37 per tonne and the LME/Shanghai copper arb window remains closed with the ratio at 1 to 7.22.

 

Bullion prices in Shanghai are stronger with the price of gold up 0.9 percent and silver up 1.4 percent.  

 

Equities suffered some weakness yesterday with the Euro Stoxx 50 dropping to close 1.5 percent lower and the Dow dropped 0.6 percent intraday, before rebounding to close up 0.4 percent. In Asia this morning, equities are mixed with the CSI 300 up, while the Hang Seng and Kospi are down. Chinese markets have been strong of late so today’s one percent rise in the CSI 300 in light of the new People’s Bank of China’s  (PBOC)  action seems somewhat tame. The latest measures come in the form of allowing commercial banks to use local government debt as collateral to get loans from the PBOC– the idea being that local government should be able to issue more bonds, which in turn should enable them to keep the infrastructure projects on schedule – this should be bullish for base metals demand. So whereas equities might have largely discounted new stimulus, perhaps the metals are only just starting to.

 

Currencies – the focus is on the dollar index that is looking weaker having breached support at 96.16, it is last at 96.12 – further weakness should underpin firmer metal prices. The euro is strong at 1.0968, as are sterling at 1.5345, the aussie at 0.7995 and the yen at 118.84, while the rouble, 51.38, and yuan 6.2044, are flat-lined.   

 

The economic agenda will be focuses on US GDP data out at 1:30pm BST and the FOMC statement out at 7:00pm BST. Ahead of that there is data on UK house prices, German CPI, EU M3 money supply and private loans and UK CBI realised prices. Other US data includes pending home sales and crude oil inventories – see table below for more details.

 

The base metals seem to range between being strong and overbought for zinc and lead, aluminium is playing catch up (but its fundamentals remain weak), nickel, tin and copper’s rallies have run into some profit-taking so look set to consolidate a while. But, they look well placed to continue higher once they have absorbed selling orders, which for copper seems to be lying above $6,100. China’s latest lending initiatives and the weaker dollar, if continued, may well underpin firmer metal prices.

 

Gold’s rebound looks constructive, silver and the PGMs are following. The fact the gold/silver ratio is falling also suggests sentiment has picked up with some investors opting to buy the more volatile silver as a proxy for gold.   

 

Overnight Performance
BST	06:12	+/-	+/- %	Lots
Cu	6088	-39	-0.6%	1115
Al	1874	-0.5	0.0%	574
Ni	13400	-10	-0.1%	476
Zn	2292.5	-1.5	-0.1%	236
Pb	2085	2	0.1%	155
Sn	15750	-150	-0.9%	20
Steel	395	0	0.0%	Total
	Average (BM ex-Steel)		-0.3%	2,576
Gold	1210.1	-1.4	-0.1%
Silver	16.58	0	0.0%
Platinum	1155	2	0.2%
Palladium	777	3	0.4%
	Average PM		0.1%

 

SHFE prices 06:12  BST		Change	% Change
Cu	43970	-40	-0.1%
AL	13340	20	0.2%
Zn	16925	-25	-0.1%
Pb	13720	-70	-0.5%
Ni	102340	-770	-0.7%
Sn	116740	-1000	-0.8%
Average change (base metals)			-0.4%
Rebar	2283	-23	-1.0%
Au	242.65	2.25	0.9%
Ag	3615	49	1.4%

 

		Economic Agenda
BST	Country	Data	ACTUAL	Expected	Previous
All Day	Japan	Bank Holiday
7:00am	UK	Nationwide HPI m/m		0.2%	0.1%
All Day	Germany	German Prelim CPI m/m		-0.1%	0.5%
9:00am	EU	M3 Money Supply y/y		4.3%	4.0%
9:00am	EU	Private Loans y/y		0.1%	-0.1%
11:00am	UK	CBI Realized Sales		26	18
1:30pm	US	Advance GDP q/q		1.0%	2.2%
1:30pm	US	Advance GDP Price Index q/q		0.4%	0.1%
3:00pm	US	Pending Home Sales m/m		1.1%	3.1%
3:30pm	US	Crude Oil Inventories		2.1M	5.3M
7:00pm	US	FOMC Statement
7:00pm	US	Federal Funds Rate		<0.25%	<0.25%

 

 

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Gold price content with USD play, focus on FOMC and US GDP

Otmane El Rhazi from The Bullion Desk.

The gold price received a boost from the recent falling dollar as disappointing data and tonight’s upcoming GDP numbers put pressure on the greenback.

The spot gold price was last at $1,209.70, sliding $3 from where it ended on Tuesday after a $10 gain. Silver was $0.06 lower to $16.54 per ounce.

Overnight data from the US was mostly disappointing – the Conference Board consumer confidence index unexpectedly declined in April, to 95.2 from 101.3. Richmond manufacturing index at -3 was worse than the forecast of -2.

This is the latest in a series of lacklustre data from the US, pressuring the dollar to fall to an eight-week low ahead of the FOMC meeting.

Market participants will now await the Federal Open Market Committee (FOMC) statement from its two-day meeting that kicked off yesterday on further guidance of the Fed’s hand in normalising monetary policy.

We will also see the release of the first reading on US first-quarter GDP number today.

The dollar index fell from 96.80 to 96.09 on Tuesday, and was last seen at 96.16.

“The investment climate appears to be stacking up more positively for gold. The USD has been on the defensive to the euro since mid-April and expectations for a Fed rate hike, which presumably have been factored into the market, has been put off until later in the year. There is ample space for a short-covering rally as net long positions are a modesr 10 million ounce,” said a report from HSBC Securities.

The other precious metals stayed within recent ranges as well, with platinum slipping $3 to $1,152 and palladium down a dollar to $775. 

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Gold end higher on poor US data, weak dollar

Otmane El Rhazi from The Bullion Desk.

Gold built on its gains today after poor US data dented the dollar and cemented dovish Federal Reserve policy.

Gold for June delivery on the Comex division of the New York Mercantile Exchange closed up $10.70 at $1,213.90 per ounce. On Monday, the yellow-metal rose nearly $30, marking the biggest single day gain since January.

“Just as we were very close to throwing in the towel on the long side of the gold trade in our most recent commentary, Monday’s action vindicated our decision to stay the course,” Edward Meir, an analyst at INTL FCStone, said.

In US data, the CB consumer confidence for April came in at 95.2, missing the 102.6 forecast. The Richmond Manufacturing Index was down three percent in April, off a projected two percent downturn. The S&P/CS Composite-20 HPI was five percent in February, ahead of the 4.7 forecast.

The dollar index fell to the lowest level since early April at 96.0580, down 0.7 percent today. The euro was 0.9 percent stronger at 1.0985 against the dollar.

Market participants now await the Federal Open Market Committee (FOMC) statement due out tomorrow. While higher rates are not yet expected, investor will look for clues on when rate might rise from 0-0.25 percent.

“Gold is poised at a round number pivot level ahead of the FOMC meeting,” London-based broker Triland Metals said. “We are holding briefly above the broken downtrend line from April but a slip back below $1,200 is likely if the market remains below the cluster of action between $1,208 and $1,210 – above here and the metal could quickly race to test the upper bound of our range at $1,225.”

In US equities, the Dow Jones industrial average and S&P were last up 0.2 and 0.1 percent respectively.

Meanwhile in Europe, investors are still watching the Greek debt situation, especially now that PM Alexis Tsipras has demoted lead negotiator and Finance Minister Yanis Varorfakis after months of ineffectiveness in resolving the country’s debt obligations.

In European equity markets, Germany’s DAX and France’s CAC-40 ended down 1.9 and 1.8 percent respectively.

As for the other precious metals, Comex silver for May delivery closed up 22 cents at $16.62 per ounce. Trade has ranged from $16.275 to $16.66. Platinum for June delivery on the Nymex rose $7.50 to $1,160.9, while the most actively traded palladium contract was at $778.70, up $8.45.

Light sweet crude (WTI) futures increased one cent to $57.07 per barrel in the most active contract.

(Editing by Tom Jennemann)

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Gold price moves higher on poor US data, weaker dollar

Otmane El Rhazi from The Bullion Desk.

The gold price climbed higher on late Tuesday afternoon following disappointing data from the US and the further weakening of the dollar.

Spot gold was last at $1,212/1,213 per ounce, up $10.50 on Monday’s close. Trade has ranged from $1,199.30 to $1,214.3.

In US data this afternoon, CB consumer index disappointed at 95.2 from the expected 102.6 and Richmond manufacturing index at -3 was worse than the forecast of -2.

This is the latest in a series of lacklutre data from the US – yesterday the US flash services PMI missed consensus at 57.8.

The dollar index, meanwhile, was last at 96.10, the lowest since March 5.

Market participants now await the Federal Open Market Committee (FOMC) statement from its two-day meeting that kicks off today.

The statement will be read closely for clues on its thinking of normalising monetary policy. While higher rates are not yet expected, the developing inflationary environment may well prompt comments from Fed chair Janet Yellen.

Inflation and slack in the labour market are the two factors that will guide the Fed’s hand in normalising monetary policy.

Also tomorrow will see the release of the first reading on US first-quarter GDP number.

“Dollar weakness, ahead of the expected downward revision to the US first-quarter GDP growth from 2.2 percent to 1.0 percent, has further reduced downside pressure helping to support metal prices following their recent runs higher,” Tom Moore, FastMarkets analyst, said.

In Europe, markets benefitted from news of the Greek government reshuffling their negotiating team, side-lining finance minister Yanis Varoufakis after he was heavily criticised at a summit of eurozone finance ministers last week for a lack of progress in critical reforms needed to secure funding. Greece could default on its debts unless a deal can be brokered with its creditors.

In the other precious metals, silver was last at $16.56/16.61, up two cents. Platinum at $1,152/1,158 increased $12, while palladium was largely unchanged at $775/780.

(Editing by Tom Jennemann)

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Q1 physical gold demand down 9 pct on slower Chinese buying – GFMS

Otmane El Rhazi from The Bullion Desk.

The gold market suffered falls in physical, investment and central bank demand in the first quarter, Thomson Reuters GFMS said.

Overall physical demand of 990 tonnes was down nine percent from 1,090 tonnes in the first three months of 2014, it said in a report on Tuesday.

Jewellery demand fell to 527 tonnes in the first quarter of 2015, a drop of almost seven percent and the lowest first-quarter figure in three years, which GFMS attributed to slower demand in price-sensitive regions.

Retail investment demand fell 17 percent to 236 tonnes while net central bank purchases fell to just 90 tonnes, a 27-percent drop.

In China, jewellery demand was down 12 percent in the first quarter at 190.9 tonnes of 24-carat material, though demand for 18-carat gold fared better, growing 20-30 percent.

GFMS attributed the drop to a combination of factors, including the attractiveness of other investments, evidenced in the 15.9-percent increase in the Shanghai Stock Composite Index over the same period.

“Chinese purchases of physical gold remained weak in the first quarter of 2015 owing to a combination of poor sentiment towards gold; more Chinese residents travelling abroad during the Spring Festival holidays; and a continuation of anti-corruption policies targeting gifting and the attractiveness of other investments,” it said.

But negative media attention in China toward gold as an investment may well had played a part in the poor performance in the first quarter, it noted.

“It will not take much to change this however and Chinese purchasers are just as likely to buy into a rally as they are once a price dip settles,” GFMS said.

In India, which vies with China as the world’s largest consumer, jewellery demand increased two percent year-on-year to 148.5 tonnes, though retail investment dropped 30.8 percent to its weakest since 2009.

GFMS expects Indian consumption to recover from the second quarter for another impressive year of total gold sales despite the negative impact of heavy rains in the first quarter.

“Globally, the gold market has been suffering over the first quarter of 2015 as a lack of firm price direction has seen many remain very cautious, especially in terms of the retail investment and investment grade jewellery side of the market,” it said.

“There have been some bright spots however and field research suggests that while many are choosing to stand on the sidelines for now there remains solid interest in the yellow metal as an asset class,” it added.

On the supply side, total supply fell to its lowest since the third quarter of 2013 at 1,032 tonnes, with scrap supply down eight percent at 283 tonnes and mine production down one percent at 729 tonnes.

(Editing by Mark Shaw)

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PBoC gold holdings up 2,000-3,000 tns since 2009 – Mitsubishi

Otmane El Rhazi from The Bullion Desk.

The People’s Bank of China (PBoC) has probably been an active buyer of gold even though International Monetary Fund (IMF) statistics show that the nation’s official holdings have been stagnant at 1,054 tonnes since 2009, Mitsubishi said.

“Speculation had mounted recently that China would make a disclosure on gold ahead of the 5-yearly IMF review of the Special Drawing Rights (SDR) currency basket next month in order to include the yuan into SDRs,” the bank’s precious metals analysts said in a Tuesday repor.

That this has not happened suggests the PBoC may wait until the IMF makes a second assessment in October or that China is instead developing a SDR-type currency basket via the Asian Infrastructure Investment Bank (AIIB), which could be a rival to the IMF.

Nevertheless, a basic supply-demand analysis indicates that it is quite possible for China to have increased its holdings two- or three-fold since 2009, the bank said.

“China has mined over 2,300 tonnes since 2009, while recycled supply has amounted to just under 1,000 tonnes. Imports of gold from Hong Kong, one of the largest and more visible routes into China, have totalled over 4,000 tonnes in the last five years, giving a total supply of 7,300 tonnes,” Mitsubishi said.

On the demand side, the China Gold Association estimates total demand at about 4,700 tonnes since 2009, leaving an implied surplus of metal in China of 2,619 tonnes, some of which could have been absorbed by the PBoC.

“Putting all this together, the PBoC’s gold holdings have possibly increased by around 2,000-3,000 tonnes in the last six years since holdings were last reported. This would represent a theoretical maximum of around 4,000 tonnes of gold held by the PBoC,” Mitsubishi said, suggesting that the central bank could be the second- or third-largest holder of gold after the US and Germany.

Further purchases of gold by China are possible, would support physical demand and would help put a floor under prices, the analysts said.

“China will disclose its gold holdings some day and when it does the market may get an immediate upside surprise, but given that it will probably only disclose holdings once it is done being a net buyer, further upside may be limited,” Mitsubishi said.

 

(Editing by Mark Shaw) 

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Gold steady ahead of important data

Otmane El Rhazi from The Bullion Desk.

Gold prices held firm on Tuesday after pushing past the psychological $1,200 an ounce level yesterday.

Gold for June delivery on the Comex division of the New York Mercantile Exchange was last up 10 cents at $1,203.30 per ounce. Trade has ranged from $1,198.60 to $1,206.40.

The yellow-metal closed nearly $30 higher on Monday on continued weak data from the major economies, a weakening dollar and market participants awaiting the Federal Open Market Committee (FOMC) meeting on Wednesday.

“Bullion found support from the release of lower-than-expected US economic data,” James Steel, an analyst at HSBC, said in a report.

Multiple sets of data from the US are scheduled for release today including consumer confidence and the Richmond manufacturing index.

Strong numbers may “weigh on gold”, but the inverse is true if weak data persists, Steel added.

In data today, S&P/CS Composite-20 home price index was up five percent in February, ahead of the 4.7 forecast.

Yesterday, the dollar index fell to a three-week low at 96.63. The euro was last 0.4 percent stronger at 1.0934 against the dollar.

Meanwhile in Europe, investors are still keen to the Greek debt situation, especially now that PM Alexis Tsipras has demoted lead negotiator and Finance Minister Yanis Varorfakis after months of ineffectiveness in resolving the countries debt obligations to creditors.

In European equities, Germany’s DAX and France’s CAC-40 were both 1.2 and 1.5 percent respectively.

In Japan, retail sales year-over-year were down 9.7 percent in March, while forecasts predicted a 7.4 percent decline.

As for the other precious metals, Comex silver for May delivery was down 29 cents at $16.365 per ounce. Trade has ranged from $16.275 to $16.57.

Platinum for June delivery on the Nymex fell $11.7 to $1,141.70, while the most actively traded palladium contract was at $773.60, up $3.35.

Light sweet crude (WTI) futures increased eight cents or 0.1 percent at $57.06 per barrel in the most active contract.

(Editing by Tom Jennemann)

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