Gold price slips back, more Russian woes bolster dollar

Otmane El Rhazi from The Bullion Desk.

The gold price slipped on Tuesday morning trading on news that Russia’s GDP will fall this year, which buoyed the dollar.

Spot gold was last at $1,193.50/1,194.30 per ounce, down $11.50 on Friday’s close and having earlier hit a high of $1,210.80 after oil prices had recovered in the previous session – light sweet crude (WTI) oil futures climbed 4.3 percent to $68.85 per barrel, which marks its biggest one-day gain since August 2012

While few market participants were convinced of the prospects of further downside from the $1,143 lows, gold’s rally above $1,200 over the past 24 hours surprised many in both the speed and depth of the recovery, UBS analyst Edel Tully said in a note.

“At current levels, gold appears to be in no-man’s-land. The market has traded within an $80-range over the past month or so and needs fresh catalysts to get guidance on where it goes next,” she added.

Prices have dipped this morning after the dollar climbed a third of a cent against the euro to 1.2437 after a Russian deputy economy minister said that the country’s GDP is likely to contract by 0.8 percent this year, down sharply from the original forecast for growth of 1.2 percent.

The Russian rouble hit at an all-time low against the dollar at 53.89 on Monday – economic sanctions and low oil prices continue to hit its economy, although it has since clawed back some ground to 51.38.

In data released today, the Spanish unemployment change at -14,700 was better than predicted, although Japanese average cash earnings disappointed.

Later, the EU PPI, US construction spending and total vehicle sales are scheduled and Federal Reserve chair Janet Yellen will speak this afternoon.

For the week ahead, markets will probably focus on US non-farm payrolls on Friday after the ECB’s monthly rate meeting statement on Thursday, which will be scrutinised for clues on quantitative easing in the eurozone.

Physical demand also remains a strong talking point, particularly following India’s ending of the 80:20 rule on imports.

“We expect the end of the downward spiral in gold will eventually be driven by a pick-up in physical demand from China and India and there are signs that this is starting,” FastMarkets analyst William Adams said.

In the other metals, silver was last at $16.17/16.22 per ounce, down 14 cents after hitting a high of $16.53 earlier in the session. Platinum was last at $1,216/1,221, down $4, while palladium at $796/801 was unchanged, although the latter is poised for large movements depending on the US car sales data later today.

(Editing by Mark Shaw)

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