Gold gave back its modest gain in the US on Thursday following a surprise widening in the US trade deficit but the yellow metal is finding some support from the latest wobble in Greek debt negotiations.
Gold for April delivery on the Comex division of the New York Mercantile Exchange was last down 40 cents at $1,265.10 per ounce. Trade has ranged from $1,256.90 to $1,273.30.
“We have been friendly towards gold for some time now and would maintain that bias,” INTL FCStone’s Edward Meir said. “We think the Greek issue will likely stir things up for a little while longer in the markets, which is why we think gold should benefit, likely at the expense of equities.”
The European Central Bank (ECB) has reversed its decision to accept Greek bonds as collateral for lending money to commercial banks.
From February 11 it will no longer accept junk-status government bonds, making access to funds more expensive and putting pressure on the country to reach new reforms.
“This gave gold another boost and moved us back into the $1,270s,” Marex Spectron’s David Govett noted. “I said yesterday that all things economic can change in the blink of an eye and today was a good example of this. It was also a good example of sticking to range trading, as any sustained move is just not on the cards at the moment.”
Even though there remains plenty of geopolitical risk in the world, UBS analyst Edel Tully said it is difficult to see safe-haven demand sustaining a move higher in gold at this point.
“Who else is going to buy and what would be the trigger?” she asked. “The early-2015 safe haven trade has run its course; the bulk of those positions have already been put on – net speculative length on Comex was at a two-year high as of late January.”
“Unless fresh catalysts emerge – perhaps a severe deterioration in economic and political factors – we believe there is limited incentive to extend the move for now. In spite of risks to global growth, we see insufficient data as yet to warrant a complete change in macro outlook,” Tully added.
Here in the US, weekly initial jobless claims increased by 11,000 to a seasonally adjusted 278,000 in the week ended January 31, which beat the 287,000 forecast.
The US trade deficit, however, rose 17.1 percent to $46.6 billion, which was the largest since November 2012 – the impact of a stronger dollar and weak eurozone growth outweighed the benefit of lower energy prices. Imports rose 2.2 percent to $241.4 billion, while exports slipped 0.8 percent to $194.9 billion in December.
Tomorrow will see the release of the non-farm payrolls report for January, which could be the catalyst for gold’s next move, analysts said.
Elsewhere, central banks across the world are increasingly loosening monetary policy to fight slowing growth and a lack of inflation. The PBoC on Tuesday was the 16th central bank to act in the face of deflationary pressures so far this year by lowering its bank reserve requirement ratio by 0.5 percentage points to 19.5 percent.
“If the history of central banking is of any benefit here then this is but the first of more such reserve requirement cuts on the part of the People’s Bank,” Dennis Gartman, editor of the Gartman Letter, said.
“We’ve no idea how many more shall follow, and nor have we any idea how far down the PBOC shall take those requirements before they stop and move in the other direction, but our bet is that the reserve requirement shall be taken below 15 percent before this trend is done,” he added.
Meanwhile, the extreme volatility in oil continues. After a eight-percent spike higher on Tuesday, light sweet crude (WTI) oil futures washed out yesterday, falling $4.56 to $48.45 per barrel on news that US oil inventories reached 80-year highs, according to weekly stock data. This morning, crude was up $1.25 or 2.62 percent at $49.68.
In currencies, the dollar was last 0.62 percent softer at 1.1414 against the euro, while Germany’s DAX and France’s CAC-40 were down 0.21 percent and 0.16 percent respectively.
As for the other precious metals, Comex silver for March delivery was down 20.5 cents at $17.190 per ounce. Trade has ranged from $16.920 to $17.500.
Platinum futures for April delivery on the Nymex were down 60 cents at $1,238.30 per ounce, while the most actively traded palladium contract was at $790.00, down 20 cents.
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