Gold was rangebound in Monday afternoon trading while investors ready for Chinese GDP figures and the prospect of quantitative easing (QE) in the eurozone.
Spot gold was last at $1,274.60/1,275.40 per ounce, down $4.70 or almost 0.4 percent, after trading within an intraday range of just $7 – business has been thinner than usual while US markets are closed for a bank holiday.
“Gold is consolidating while investors look to reduce their currency risk following the removal of the Swiss franc’s peg to the euro,” FastMarkets analyst Tom Moore said. “This was seen as raising the likelihood of a QE programme being announced by the ECB this week, which if confirmed we would again expect to spur safe-haven buying.”
The European Central Bank, which meets on Thursday, could announce a sovereign bond-buying programme worth 600 billion euros in a bid to lift inflation closer to its target of 2.0 percent.
“There is currently a lot of scepticism on the ECB’s ability to deliver on QE, and on the back of this UBS economists and FX strategists flag that the risks are skewed to the upside,” UBS’ Edel Tully said.
A sharp weakening of the euro if the QE package is larger than expected could hurt gold, which in turn could trigger shorts to rebuild positions and recent longs to take profit here, she added.
“This could well be offset by further safe-haven bids should the ECB sound considerably worried about the eurozone. A larger package should also be gold-friendly from a liquidity perspective and the larger expansion of the ECB’s balance sheet, suggesting that any knee-jerk reaction on the back of currency moves could fade once the market digests the outcome,” she added.
Investors will also scrutinise China’s full-year economic statistics for 2014 on Tuesday. GDP growth is expected to fall short of Beijing’s 7.5-percent GDP target to its slowest in 24 years, with the likely figure at 7.3 percent, down from 7.7 percent in 2013.
Silver followed gold lower, slipping four cents to $17.69/17.74 per ounce, platinum at $1,261/1,271 was unchanged and palladium at $754/760 was up $3.
(Editing by Mark Shaw)
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