Gold back in consolidation mode over Chinese/Greek uncertainty

Otmane El Rhazi from The Bullion Desk.

Gold returned to consolidation on Tuesday morning after poor Chinese data dampened sentiment and uncertainty over the Greek political situation providing early impetus for safe-haven buying.

Spot gold was last at a price of $1,236.60/1,237.40 per ounce, down $1.50 on the previous session and short of what analysts pegged as the next psychological level at $1,251, the metal’s 200-day moving average. Silver followed gold lower – having earlier been above $17, it was last 16 cents lower at $16.80/16.85.

The metal had initially been under pressure from poor Chinese data this morning, which exacerbated fears about a continued economic slowdown in the country, the world’s largest consumer of gold.

Its CPI for January declined to 0.8 percent from 1.5 percent previously, the lowest since the end of 2009 and below market expectations for a reading of 1.0 percent. Its PPI also fell to -4.3 percent from -3.3 percent previously.

Over the weekend, Chinese exports slipped 3.3 percent in January while imports dropped a significant 19.9 percent – its total trade surplus at $60 billion was far higher than the expected $48.9 billion.

Meanwhile, Greece is on a collision course with the eurozone and the International Monetary Fund – Finance Minister Yanis Varoufakis has proposed that the country’s new government suspend or reverse 30 percent of the reforms in its 240-billion-euro bailout.

The country urgently requires 7 billion euros to repay maturing bonds and a further 1.9 billion euros in IMF loans or risk its cash reserves running out next month.

It is also seeking a second bailout from its lenders that would secure finance for four years, which would give Prime Minister Alexis Tsipras’ government time to negotiate a restructuring of long-term debts and overhaul its tax system.

While gold has fallen below the 1,100 in euro terms, it should rise above this level soon because the Greek uncertainty “is likely to contribute to solid demand for gold”, Commerzbank noted.

“Greece’s exit from Europe’s monetary union no longer appears quite so far-fetched,” it added.

In other data today, French industrial production at 1.5 percent exceeded expectations, as did the Italian number at 0.4 percent.

Still to come out of the US are the NFIB small business index, JOLTS job openings, wholesale inventories and IBD//TIPP economic optimism figures.

The PGMs are steady – platinum was last at $1,214/1,219 per ounce while palladium was down $1 in price at $775/781.

(Editing by Mark Shaw)

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