Gold has recovered after a brief foray into the high $1,100s; nevertheless, a strong dollar and weak futures positioning have the market on its back foot.
Gold for April delivery on the Comex division of the New York Mercantile Exchange was last up 90 cents at $1,209.10 per ounce on Tuesday. Trade has ranged from $1,194.60 to $1,210.90.
“Overnight someone, somewhere, for some reason, tried to break the market down through the support area of $1,190/95 but failed and we are now back to unchanged,” Marex Spectron’s David Govett said. “So once again, gold proves that attempting to look for a sustained move anywhere is pointless, carry on trading the ranges.”
Meanwhile, the speculative length in Comex gold futures fell by 0.93 million ounces to 15.05 million in the week ending February 24, as longs continued to liquidate positions.
“Gross longs in gold are now more or less back to levels at the beginning of the year. This puts the market in a healthier position and relieves much of the downside pressure that had prevailed since the end of January,” UBS’ Edel Tully said.
“We believe cleaner positioning could urge gold to decide where it goes from here – with no clear catalysts right now this could be a challenge,” she added.
In the wider-markets, the dollar was 0.17 percent stronger at 1.1166 against the euro, while Germany’s DAX and France’s CAC-40 were down 0.06 percent and 0.12 percent respectively.
“The stronger dollar also sapped some of gold’s strength, as it rose to an 11-year high against a leading basket, with Asian currencies being under particular assault,” INTL FCStone’s Edward Meir said.
“The Chinese yuan dropped to a two-and-a-half year low and there were sharp declines in the Australian dollar as well on speculation that China’s weekend cut in interest rates will increase the probability of a second reduction in as many months by the Reserve Bank,” Meir added.
Over the weekend, the China’s central bank cut both the one-year deposit rate and the one-year lending rate by 25 basis points to 2.5 percent and 5.35 percent respectively. This marks the second easing in its policy in two months following a cut in the required reserve ratio ahead of a widely telegraphed fall in the country’s GDP growth target for the year.
In today’s data, Japanese average cash earnings at 1.3 percent were better than the expected 0.6 percent. German retail sales at 2.9 percent were better than expected and Spanish unemployment change was better than the forecast, dropping 13,500. But the eurozone PPI disappointed at -0.9 percent.
From the US, IBD/TIPP economic optimism and total vehicle sales are scheduled for release this afternoon.
“We think gold will struggle over the short-term, as it confronts the headwinds of a stronger dollar and a wave of deflationary pressures sweeping the planet despite enormous amounts of stimulus being pumped into the system,” FCStone’s Meir said.
“The fact that we have not seen inflation despite all this does not fit the gold inflation narrative that comfortably. And with the Greek situation now also kicked down the road for several more months, the path of least resistance seems lower still,” he added.
As for the other precious metals, Comex silver for May delivery were up 8.9 cents at $16.540 per ounce. Trade has ranged from $16.070 to $16.580.
Platinum futures for April delivery on the Nymex were down 10 cents at $1,189.80 per ounce, while the most-actively traded palladium contract was at $828.30 per ounce, down $2.80.
The post Gold back above $1,200/oz after wobble in Asia trade appeared first on The Bullion Desk.
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