Gold under pressure, focus turns to ECB and US jobs data

Otmane El Rhazi from The Bullion Desk.

Gold remained rangebound in Tuesday afternoon trading either side of $1,200, proving largely immune to a stronger dollar ahead of Thursday’s ECB meeting and Friday’s blockbuster jobs report.

The spot price was last at $1,203/1,204 per ounce, down $3.70 on Monday’s close but up from an intraday low of $1,195.50. The dollar was last at 1.1197 against the euro, up around a fifth of a cent and rebounding from intraday lows of 1.1152.

“The stronger dollar sapped some of gold’s strength, as it rose to an 11-year high against a leading basket,” INTL FCStone analyst Edward Meir said.

Silver at $16.19/16.16.24 per ounce was down 21 cents, platinum edged $1 lower to $1,183/1,188 was down and palladium was unchanged at $824.

At the European Central Bank meeting on Thursday, president Mario Draghi may reveal details of its 1.14-trillion-euro quantitative easing programme.

And the latest US nonfarm payrolls report on Friday will be closely watched for any impact it may have on the Federal Reserve’s thinking about raising interest rates. Some 240,000 jobs are forecast to have been created last month.

The members of the US central bank’s policy board are locked in an increasingly public debate on when will be the right time to raise rates, which have been near zero since December 2008. The current consensus is for the first increase to take place in the second half of this year.

“The US employment data could potentially offer some guidance; a sharp deviation from expectations would likely create volatility around the release,” UBS said in a note. “[But] looking beyond this week’s payrolls data, we think a lack of any significant catalyst in the weeks ahead could imply range-trading for gold.”

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.

“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.

(Editing by Mark Shaw)

The post Gold under pressure, focus turns to ECB and US jobs data appeared first on The Bullion Desk.