The gold price was trading at its strongest in one month during Monday’s early morning sessions as the metal benefited from a drop in dollar strength.
Spot gold was last at $1.227.20/1,228 per ounce, a $4.40 increase on Friday’s close, having peaked at $1,231.30.
“The close [on Friday] above $1,220 bodes well for gold and opens the door for a push toward $1,240 and $1,250 beyond that,” said MKS Capital.
“Precious metals seem to be benefitting from the weaker dollar and the pull back in equities, with gold prices stretching to the upside and closing in on important resistance at $1,238.60,” added FastMarkets analyst William Adams.
In currencies, the dollar was last at $1.1853 having come under pressure from Friday’s US employment data releases.
The report sounded several worrying notes. The labour force participation rate edged down by 0.2 percentage points to 62.7 percent in December, while average hourly earnings fell five cents to $24.57 following an increase of six cents in November.
Labour reports over the next several months will take on added significance because the Federal Reserve is on the verge of raising interest rates. The current market consensus is that rates will rise in mid-2015 although this is a moving target that will be dictated by jobs and inflation data.
“Although this data series is prone to substantial revisions, the weak reading might nevertheless add to the case of those on the US Fed’s FOMC worried about weakening inflation and receding market-based measures of inflation expectations,” said Credit Suisse.
Meanwhile, speculative positioning is back at August highs, while ETP flows have started the year on a modestly positive note, said Barclays in a note, adding that weaker correlations favour gold.
“Gold’s three-month rolling correlation has fallen to just under 30 percent against oil down from the July 2013 highs hit last month, the correlation against the EUR/USD has fallen to just above 30 percent from almost 60 percent in November, and the negative correlation against US 10y Treasuries has strengthened to 30 percent from 10 percent in December,” they said.
Weak oil prices – currently around five year lows – are also playing their part in supporting the yellow metal.
“Normally, lower oil prices ate a negative for gold, but prolonged oil price declines may be fanning concerns that further losses could have a dislocative impact on the financial markets and oil exporting economies,” said HSBC’s James Steel. “This we believe is creating safe haven demand for gold.”
In data, the schedule is fairly light today with no metal market-moving numbers scheduled.
Silver at $16.57/16.61 was $0.10 higher, while platinum was up $5 at $1,232/1,237 was its strongest since December 12 and palladium at $801/807 increased $2.
The post Gold price hits one month high as dollar softens appeared first on The Bullion Desk.
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