Gold price nervy around $1,200; ECB, US NFP eyed

Otmane El Rhazi from The Bullion Desk.

The gold price was rangebound around $1,200 on Thursday morning but market concerns are growing ahead the release later today of details about the ECB’s quantitative easing programme before blockbuster US jobs data on Friday.

Spot gold was last at $1,200.20/1.201.00 per ounce, down $1 and limited to a $7 intraday range so far.

Heavy downside pressure from a dollar trading at 11-year highs against the euro continues to put support at $1,200 in focus, with Friday’s non-farm payrolls likely to exacerbate moves. The greenback touched another fresh September 2003 high this morning at 1.1025.

“Gold is holding up well considering the stronger dollar and the pullback in the net long fund position on Comex but, with monetary policy in many countries weakening and currencies under pressure, it seems as though gold is picking up some support from those looking to hedge against currency weakness,” FastMarkets analyst William Adams said.

With slack in the US labour market continuing to wane, a near-term US interest-rate rise becomes increasingly likely despite Federal Reserve chair Janet Yellen recently claiming that an move up from near-zero levels is at least two meetings away.

During US hours on Wednesday, gold took some respite from a speech from Fed member Charles Evans who claimed that higher interest rates should be avoided until at least 2016.

For now, volatility is expected when details of the ECB’s bond-buying programme – of 60 billion euros per month – are announced today in the ECB’s policy meeting press conference.

“The market is hoping to hear details of the QE programme that is likely to commence in the next few days [and] is bound to have an impact on commodities in general and precious metals in particular,” Commerzbank said in a note.

“The anticipated significant increase in the ECB’s balance sheet total is likely to drive the gold price in euros up further. What is more, the ongoing devaluation race between currencies should contribute to solid demand for gold as an alternative currency as the year progresses,” it added.

Overnight, Chinese Premier Li Keqiang announced that the country will target economic growth of “around” seven percent in 2015, down from 7.5 percent last year.

Li proposed a shift to a consumption-based economy from exports and investments while pushing ahead with liberalising the banking system and taking further steps to free up interest rates and credit allocation, INTL FCStone’s Ed Meir noted.

Should the country achieve its seven-percent target, it would still be the slowest pace in 24 years while the country continues to modernise into a middle-income status economy.

In data this morning, German factory orders missed consensus at -3.9 percent while the eurozone’s retail PMI dropped marginally to 46.4.

Unemployment claims, revised non-farm productivity, factory orders and revised unit labour costs are due from the US later.

In other metals, silver remains unchanged at $16.17/16.22 per ounce, as was platinum at $1,177/1,182 while palladium was up $1 at $824/830.

(Editing by Mark Shaw)

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