Gold price steadies around $1,105, equities rally pauses

Otmane El Rhazi from The Bullion Desk.

Gold was rangebound on Thursday morning after the previous session’s price slump when a rally in global equities paused, while investors remain cautious ahead of the Federal Open Market Committee meeting next week.

The spot gold price was last at $1,107.70/1,108 per ounce, little changed from the previous close. Trade has ranged from $1,104.0 to $1,108.6 so far. Gold slumped to $1,101.5 on Wednesday, the lowest level in a month.

The FOMC meeting on September 17 is expected to trigger a more definitive price movement, especially if the FOMC decides to raise the Federal Funds rate for the first time since 2006.

“We expect investors to further reduce net long positions in the wake of Fed rate hikes this year and next year [along with] a higher US dollar,” ABN AMRO said on Wednesday. “Gold weakness is not over yet and further price falls are likely.”

With $1,100 a key support level, $1,115-1,120 will provide resistance, according to MKS.

Forecast-beating US job openings data raise the chance of the Fed raising rates next week – Jolts jobs openings rose to 5.8 million, the biggest gain since April 2010.

“We do not think one piece of data should affect the Fed so we see the market’s reaction as it wanting an excuse to consolidate, which suggests the market may have been surprised by the extent of some of the rallies,” FastMarkets’ William Adams noted.

In equities, Asian and European stocks retreated this morning, taking direction from major US stork market indexes that closed 1.2-1.4 percent lower on Wednesday.

As well, lacklustre data from China weighed. The August CPI at two percent was up from 1.6 percent in July and slightly higher than the expected 1.9 percent but the PPI fell for the 42nd straight month – at 5.9 percent, it was below the drop of 5.4 percent in July and forecasts of 5.6 percent.

Elsewhere, the Indian cabinet has approved a gold monetisation scheme designed to mobilise private gold holdings and reduce the country’s reliance on imports by offering a deposit structure for those holding ‘idle’ gold, MKS noted.

The rate of interest to be paid still is yet to be determined but is likely to be around 2.0 percent. The costs of transacting, gold assays and vaulting also have to be considered and factored in.

In other data, French final non-farm payrolls came in as expected, while the country’s industrial production disappointed. From the US, initial jobless claims, import prices and wholesale inventories are due later.

Silver was last at a little-changed $14.73/14.78 per ounce while platinum at $984/994 was up $6 and palladium was $8 higher at $583/588.

“The industrial precious metals may have more room on the upside,” FastMarkets’ Adams noted, although Chinese car sales figures declined year-on-year in August for the third consecutive month, Commerzbank noted.

(Editing by Mark Shaw)

The post Gold price steadies around $1,105, equities rally pauses appeared first on The Bullion Desk.