Gold price hits 1-wk high on Chinese restocking, dovish Fed

Otmane El Rhazi from The Bullion Desk.

The gold price moved higher on Thursday morning, bolstered by physical demand out of China and the dovish nature of Fed Chair Janet Yellen’s comments in testimony this week.

Spot gold was last up $11.70 at $1,216.50/1,217.20 per ounce, a one-week high, with the metal trading within a $14 intraday range so far. Silver followed gold higher, rising 31 cents to $16.82/16.87.

“I said yesterday that we will carry on within the same ranges and I don’t see anything changing that. Now that gold has again held at $1,200 I would also reiterate what I also said yesterday that I think we will see an attempt higher now,” Marex Spectron’s David Govett said.

The metal has been bolstered by further buying out of China overnight following its return from the annual Spring Festival holiday.

“Physical gold demand appears to be picking up again now that Chinese traders have returned after the New Year celebrations. This is reflected in the premiums being paid on the Shanghai Gold Exchange,” Commerzbank said.

And while premiums were slightly lower at around $3-4 than $5-6 on Wednesday, according to MKS, they are at the same level and in some instances higher than prior to the festival period when large volumes of gold were passing through its vaults.

Further comments from Fed chair Janet Yellen late in London trading in the previous session also appear to have provided a small bullish case for precious metals in the near term.

Yellen suggested that the FOMC will not consider an interest-rate rise for at least another two meetings or until June at the earliest, citing concerns about stagnant wage growth and low inflation.

“Although she did not have anything different to say, we suspect that gold investors came away with the reinforced notion that the expected rate increases that were supposed to take effect around June will now not happen until later in the year,” INTL FCStone’s Ed Meir said in a note.

“Be that as it may, this is a rather slim read on which to build a bullish case on for gold and we still are of the view that the precious metal will be under pressure,” he added.

In data today, the GFK German consumer climate figure at 9.7 was broadly in line with consensus, while the country’s unemployment change at -20,000 bettered forecasts.

For the eurozone as a whole, M3 money supply at 4.1 percent also outperformed, as did private loans at -0.1 percent, but Italian retail sales fell short at -0.2 percent.

Monthly consumer inflation figures, weekly unemployment claims data and durable goods orders are due from the US later.

“All of these have the capacity to move the market one way or the other. So expect muted trading ahead of this,” Marex Spectron’s Govett added.

In other metals, the PGMs built on the previous session’s gains – platinum was last up $18 at $1,186.00/1,191.00 per ounce, while palladium was $7.50 higher at $811/816.

(Editing by Mark Shaw)

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