Gold price slips but improved ECB data bodes well

Otmane El Rhazi from The Bullion Desk.

The gold price handed back some of the gains made in previous sessions on Friday but tentative signs that eurozone economies are turning a corner has provided some cheer.

Spot gold was last at $1,154.40/1,55.20 per ounce, down $5.70 on Thursday’s close and trading within a $13 intraday range.

French third-quarter preliminary GDP rose to 0.3 percent, better than the expected 0.1-percent rise and the previous quarter’s revised -0.1 percent, but non-farm payrolls were down 0.2 percent. German preliminary GDP came in as expected at 0.1 percent.

The final CPI for the eurozone was as expected at 0.4 percent, unchanged from last year, while the flash GDP was up 0.2 percent from last quarter’s 0.1 percent. Final core CPI was as forecast 0.7 percent, unchanged from the previous quarter.

This could alter the perception that the European Central Bank was readying a full-fledged quantitative easing programme next month to prop up the ailing eurozone economy.

A move away from QE would signal that the euro is improving and thus could shave some of the strength from the dollar and ultimately improve gold prices. The euro was last at 1.2458 against the dollar.

“Signs of renewed growth in the eurozone – it has potentially turned a corner – backs up the ECBs’ decision to await the results from its LTRO and ABS programme before considering implementing a full QE programme, as had been increasingly expected,” FastMarkets analyst Tom Moore said.

“This indication of renewed strength and lower QE potential is likely to reduce the US dollar’s upside momentum, bolstering precious metal prices,” he added.

In other data today, more disappointing data out of China will put pressure on the Chinese government to introduce further stimulus measures, as the country looks to meet its 7.5-percent target for annual GDP growth.

This morning, Chinese new loans at 548 billion yuan missed the forecast 615 billion yuan while M2 money supply grew 12.6 percent from a year earlier, missing the 12.9-percent estimate.

“The falls in Chinese new loans and M2 money supply signals that the Chinese central bank’s recent liquidity injections have not reached the real economy,” Moore said.

Later today, the market will eye retail sales, consumer sentiment and import price data out of the US.

In the other metals, silver was 19 cents lower at $15.39/15.44 per ounce, platinum edged $2 higher to $1,192/1,197 and palladium at $765/770 was up $3.

(Editing by Mark Shaw)

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