The gold price edged back from three-month highs on Wednesday morning but remains underpinned by global economic growth concerns.
Spot gold was last at $1,227.80/1,228.60 per ounce, down $4.60 on Tuesday’s close after trading within a $9 intraday range.
“Precious metals did well yesterday, especially gold. Given so much uncertainty in the markets and on the geopolitical front, with the Greek election only weeks away and the stand-off within OPEC, we expect gold to remain well supported, which should help underpin the rest of the precious metals complex,” FastMarkets analyst William Adams said.
Despite losing ground earlier, the metal has support from a downward revision to the World Bank’s growth forecast – it now sees growth at 3.0 percent in 2015, down from 3.4 percent previously.
“Worryingly, the stalled recovery in some high-income economies and even some middle-income countries may be a symptom of deeper structural malaise,” World Bank chief economist Kaushik Basu said.
Falling US Treasury yields – the curve on 10-year treasury bonds is now at its lowest since May 2013 – is also burnishing gold’s investment status. A US interest rate rise appears less of a near-term risk, although the dollar once again hit a nine-year high against the euro at 1.1727.
Safe-haven buying triggered by the struggling eurozone economy is likely to continue to underpin prices until the ECB’s policy meeting on January 22, where a full-blown quantitative easing programme is expected to be announced.
Physical demand in China has improved in the run-up to the Lunar New Year holiday and is likely to continue to support prices throughout January.
“Chinese demand continues to motor along and is certainly not over yet with onshore banks preparing import quotas for Chinese New Year,” MKS said in a note. “We should see seasonal demand continue to flow in within this space keeping the market supported through Jan-Feb or at the very least providing a cushion on pullbacks.
“What has surprised us is the fact that the Chinese have not really been waiting for a pullback like they usually do, instead they have been happy to chase the market higher,” it added.
In data today, the French CPI at 0.1 percent was better than expected, while eurozone industrial production at 0.2 percent also bettered forecasts.
Still to come out of the US are retail sales data, business inventories and import prices.
In other metals, silver at $16.64/16.69 per ounce was down 38 cents, while platinum at $1,230/1,235 was down $8.
Palladium sold off during early trading to equal a three-week low at $785 before settling at $789/794 per ounce, still down $23.
(Editing by Mark Shaw)
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