Gold price gains on poor US data but optimism grows in Europe

Otmane El Rhazi from The Bullion Desk.

Gold made modest gains in afternoon London trading after forecast-missing US data offset an easing in risk-related buying.

The spot gold price was last at $1,223.80/1,224.60 per ounce, up $4.10 on the previous session. Likewise, silver was last up 11 cents at $16.89/16.94, platinum was $9 higher at $1,200/1,205 and palladium climbed $5.50 at $769/774.

“Gold is struggling as there’s more optimism in the air on Europe and Ukraine but it is getting some support from the weaker dollar, so it’s been a volatile but ultimately directionless today,” Matthew Turner of Macquarie told FastMarkets.

The metal was boosted after US weekly unemployment claims at 304,000 were larger than the forecast 282,000, while retail sales at -0.8 percent and core result sales at -0.9 percent also disappointed.

The dollar retreated to 1.1410 against the euro after earlier trading as high as 1.1303.

Gold peaked on the London open at $1,233.10 after the Bank of Japan (BoJ) quashed hopes of further monetary easing by labelling it counterproductive. Simultaneously, Sweden’s central bank, the Riksbank, cut interest rates by 10 basis points -0.1 percent to counteract the country’s spiralling deflation problem.

The rate will remain at -0.10 percent until inflation is close to the bank’s target of two percent, which is on the slate for late next year, the bank said. It will also buy government bonds amounting to 10 billion Kroner.

But gold almost immediately pared its gains after a ceasefire agreement was reached between political leaders from Ukraine and Russia.

The fragile agreement aims to pave way for ambitious measures that include constitutional reform in Ukraine and special status for rebel-held areas. This tentatively brings an end to months of fighting, which will dampen gold’s appeal as a source of safe-haven investment in the near term.

Risk-sentiment is also being hit by the growing possibility of Greece reaching an agreement with its creditors. The Greek government is presenting its alternative debt plan proposals to eurozone finance ministers, with reports suggesting that the country is looking to overhaul 30 percent of its bailout obligations and replace them with a 10-point plan of reforms.

In other data today, the German final CPI at -1.1 percent was lower than expected and down for a third consecutive month, eurozone industrial production came in flat and US business inventories were at 0.1 percent.

(Editing by Mark Shaw)

The post Gold price gains on poor US data but optimism grows in Europe appeared first on The Bullion Desk.