Gold price moves off 3-mth lows but dollar powers higher

Otmane El Rhazi from The Bullion Desk.

Gold edged higher on Tuesday afternoon, shrugging off a further rise in the dollar against the beleaguered euro.

Spot gold, which earlier dropped to its lowest since December last year at $1,155.20, was last at $1,164/1,164.80 per ounce, up $2.20 on Monday’s close.

The dollar climbed to its highest since April 2003 at 1.0697 against the euro on talk that Deutsche Bank has lowered its euro-dollar forecast to 0.85 by 2017. The two currencies are approaching parity, which was last the case in 2002.

Gold sank on Friday after the release of better-than-forecast US jobs data that increased the likelihood the Federal Reserve will raise interest rates from near-zero levels in the near term.

“We see little that could potentially change the downward drift in most commodity markets, as the complex remains under the bearish influence of a stronger dollar and a Fed that is clearly on a higher rate trajectory just as other central banks are moving the other direction,” INTL FCStone analyst Edward Meir said.

In the eurozone, the ECB this week rolled out a 60-billion euro-per month quantitative easing programme in a bid to prop up its ailing economy. Investors are also watching talks over the Greek debt crisis – negotiations are set to resume tomorrow.

“One factor that could break the cycle is if we start to see signs of weaker economic growth in the US or an uptick in international growth, but neither scenario seems to be gelling just yet,” Meir said.

“We think 2015 will generally be a year where declining commodity prices will continue to force marginal production out of the system and possibly lead to higher prices going into next year,” he added.

In data, Chinese figures released over night were mixed. Its PPI fell 4.8 percent, more than the expected 4.3 percent and the worse reading since December 2009. But the country’s CPI surprised to the upside, increasing 1.4 percent, better than the forecast 1.0 percent.

French industrial production came in better than expected, rising 0.4 percent, while Italian industrial production disappointed at -0.7 percent.

Data from the US disappointed – wholesale inventories at 0.3 percent were higher than the forecast 0.0 percent and above the previous month’s 0.1 percent and Jolts job openings at 5 million were below the forecast 5.04 million. Earlier, the NFIB small business index at 98 undershot the expected 99.2.

In the other metals, silver was last at $15.73/15.78 per ounce, up two cents, while platinum was $13 lower at $1,132/1,137 and palladium was last at $802/807, down $15.

(Editing by Mark Shaw)

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