Gold price poised to retest $1,200 if dollar remains weaker

Otmane El Rhazi from The Bullion Desk.

The gold price remained poised to retest the key psychological level of $1,200 on Wednesday morning, with the dollar’s weakness providing upward impetus.

The spot gold price of $1,191.00/1,191.80 per ounce was unchanged from the previous session’s close and around the middle of its sub-$8 intraday range. The metal peaked at $1,194.20 on Wednesday and $1,195 on Tuesday.

The other precious metals followed in gold’s footsteps – silver was last eight cents higher at $16.95/17.00 per ounce while palladium was up $7 at $766/771 and platinum climbed $5 to $1,139/1,144.

“While the dollar is on a back foot and with the rand strengthening, sentiment may well remain more positive for bullion and the PGMS. We still feel it will require the gold price to establish itself back above $1,200 to reduce the current vulnerable chart picture,” FastMarkets analyst William Adams said.

The dollar was last at 1.0951 against the euro, down almost half a cent. The US currency has been flirting with the 1.10 level since last week, allowing gold to move slowly towards $1,200, a level it has not breached in nearly three weeks. Any further dollar-negative moves could provide the impetus for it to do so.

“We seem to have a slight resistance at $1,195 on spot and I think if we can break that this morning, then we will see a move up to $1,200 and above. The dollar is off again, so this should aid the advance,” Marex Spectron’s David Govett said.

“Overall though, there is nothing exciting about the markets, they are still running somewhat short, hence my view that we can see higher prices if the dollar continues to slide,” he added.

A positive German IFO business climate figure this morning spurred the euro higher – at 107.9, it beat the forecast 107.4 and was at its highest since July 2014.

Companies were more satisfied with the current business situation in Germany, the lynchpin of the European economy, while also expressing greater optimism about future business developments.

In other gold news, central banks added small amounts of gold to their balance sheets in February, which may be gold negative in the near-term, International Monetary Fund data suggests. Russia failed to add any new stocks while Kazakhstan added just 2.6 tonnes and Tajikistan and Malaysia added just 0.6 tonnes. Turkey’s stocks dropped 4.6 tonnes.

In data still to come out of the US, core durable goods orders may trigger fluctuations in currencies.

(Editing by Mark Shaw)

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