The gold price consolidated below $1,300 on Friday morning after the euro crashed following the ECB announcement of a 1.1-trillion-euro quantitative easing programme on Thursday.
Spot gold was last at $1,294.70/1,295.50 per ounce, down $5.50 and trading within an intraday range of $10.
Pressure from a dollar, which struck a fresh 11-year high against the euro at 1.1254, has weighed on gold, while reduced buying overnight in China pushed it to a session low of $1,292.
The dollar gained after the ECB said it will buy 60 billion euros per month of government bonds and debt securities issued by European institutions from March this year until September 2016 stoke inflation towards two percent.
Gold consequently hit a fresh five-month high at $1,307.50 before retreating. Still, today’s consolidation is part of a wider more bullish stance that is necessary to sustain gold’s stance above $1,300, HSBC’s James Steel said.
“Despite gold’s historical positive correlation to the EUR, the scope for further EUR losses would provide a boost for bullion, in our view, based partially on gold’s appeal as a perceived safe haven asset along with gold being a currency that you cannot print more of,” he said.
“Gold may have room for further gains in the immediate near-term, but a consolidation may be necessary for prices to sustain over the psychological $1,300 per ounce level in the medium term,” Steel added.
All eyes will now turn to Sunday’s Greek elections, where Syriza continues to extend its lead in the polls to 3.1-point. A victory for the far-left anti-austerity party could set off another eurozone crisis.
Gold has therefore continued to benefit from safe-haven inflows on concerns that Greece is moving closer to an exit from the bloc
“We would generally expect gold to hold steady until the result of the Greek election. Gold has moved a lot already this year so some consolidation at lower levels would not be too surprising,” FastMarkets analyst William Adams said.
The country’s prime minister has warned the public that any resulting political uncertainty may increase the risks to the country’s creditworthiness, and whether or not it will stay in Europe.
In Chinese data today, the HSBC flash manufacturing PMI at 49.8 bettered expectations of 49.5 and the previous month’s 49.6.
The French flash manufacturing PMI at 49.5 was better than the expected 48.1 but the services equivalent at 49.5 missed the forecast 50.9. The German flash manufacturing at 51.0 also fell short, while the services PMI was largely in line with expectations at 52.7.
In the eurozone as a whole, the flash manufacturing PMI at 51.0 was as expected, as was the services index at 52.3. Still, these figures show that growth in business activity in the bloc’s economy accelerated to its fastest for five months.
Still to come out of the US are the flash manufacturing PMI, existing home sales and the CB leading index.
In other metals, silver at $18.19/18.24 per ounce was down seven cents after earlier hitting $18.40, just short of the September high hit in the previous session at $18.49.
In the PGMs, platinum retreated from four-month highs and was last down $3 at $1,269/1,279 per ounce, while palladium gained $3 to $771/776.
(Editing by Mark Shaw)
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