The gold price remained marginally above the key psychological level of $1,200 on Wednesday morning but is at risk in the absence of physical support from the Chinese market.
Spot gold was last at $1,209.20/1,210.00 per ounce, up 60 cents on Tuesday’s close, with the dollar modestly higher against the euro at 1.1390.
Gold struck a six-week low in the previous session at $1,203.80 after opening at $1,231.30 when investors liquidated positions en masse as China’s Lunar New Year holiday began.
While a range of macroeconomic factors in January gave gold upward impetus, sustained physical demand out of China had underpinned the near-10-percent climb in the first few sessions of 2015, Shanghai Gold Exchange withdrawals – a useful barometer for demand – surged to 255 tonnes in January alone.
“I have been saying for weeks now that with the absence of Chinese demand over their New Year holiday period gold will come under pressure – I just didn’t think it would be so swift,” MKS’ Alex Thorndike said in a note this morning.
The moves were exacerbated by a rise in US Treasury bond yields. The 10-year yield reached 2.14 percent at one stage, up from 2.04 percent, on speculation over a prospective rise in US interest rates.
Today will see the release of the FOMC’s minutes for the January meeting – these will be scrutinised heavily for clues as to when rates will climb from near-zero levels. Previously, concerns over world growth prospects, slowing inflation due to lower oil prices and slack in the labour market appear to have steadied the Fed’s hand.
“We expect the Fed to exercise caution in its rate decision, especially given its projections of further deflation in the short term – any signal that it is moving towards raising rates would provide another boost to dollar strength, further reducing US competitiveness,” FastMarkets analyst Tom Moore said.
“This has lowered the strength of the dollar and gold on decreased safe-haven demand,” he added.
Investors will also be eyeing Greece, with eurozone finance ministers set to meet today to decide whether or not to keep granting emergency liquidity assistance to Greek banks.
Speculation has emerged that Greece will apply for an extension of its loan agreement for six months, with the country’s 240-billion-euro bailout set to expire at the end of the month.
US building permits, its PPI, housing starts, capacity utilisation rate, industrial production and TIC long-term purchases are due later
Other metals followed gold in the previous session – silver also struck a six-week low at $16.29, a drop of nearly six percent, and looks susceptible to falling further today. The metal was last at $16.45/16.50 per ounce, down one cent on Tuesday’s close.
The PGMs were a little more mixed. Platinum struck its lowest in nearly six years in the previous session and again in the early hours of Wednesday at $1,168, before settling at $1,172/1,177 per ounce, down $4, while palladium gained $2 to $780/785.
(Editing by Mark Shaw)
The post Gold price at risk around $1,200 after China pauses for holiday appeared first on The Bullion Desk.
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