Gold and silver posted strong gains on Monday as another round of weak US data pushed the dollar lower and provided some ammunition for Federal Reserve doves.
Gold for June delivery on the Comex division of the New York Mercantile Exchange closed up $28.20, or 2.4 percent, at $1,203.20 per ounce. Trade ranged from $1,177.60 to $1,206.70.
As for the other precious metals, Comex silver for May delivery ended up 75.8 cents, or 4.9 percent, at $16.394 per ounce, while the most-actively traded platinum contract on the Nymex settled at $1,149.90 per ounce, up $28.50.
“Bullion found support from the release of lower-than-expected US economic data,” said HSBC’s James Steel, who noted that the US flash services PMI missed consensus at 57.8, though the number still suggests a sustained upturn in US service sector output. But it follows poor durable goods orders data on Friday at -0.2 percent.
Meanwhile, the Federal Reserve Bank of Dallas’ manufacturing outlook index fell to -16 for April from a reading of -17.4 for March.
“Market participants are relating the recently slippage in the dollar to disappointment in the US economic performance. There are several potential important benchmarking events ahead for the dollar with the first reading on first quarter GDP and the FOMC meeting, both on 28 April,” Steel said.
“A better-than- expected GDP reading may weigh on gold and conversely a lower-than-expected reading may provide support for bullion,” he added.
In the wider-markets, the dollar fell by 0.13 percent to 1.0888 against the euro, while the Dow Jones industrial average and S&P 500 were down 0.21 percent and 0.69 percent.
The Federal Open Market Committee will kick-off its two-day meeting on Tuesday and, according to the CME Group’s FedWatch, there is a zero-percent chance that the central bank will adjust rates. This should not be surprising given some high-profile headline misses recently, such as the US gaining only 126,000 jobs in March.
The odds are not much better for June, where the futures market only indicates a 2.14 percent chance of rates rising to 0.5 percent from 0-0.25 percent currently, according to CME data.
The CME Group FedWatch is based on 30-Day Fed Funds futures prices, which have long been used to express the market’s views on the likelihood of changes in US monetary policy.
September and October could be interesting – FedWatch puts the implied probability for a rate increase in those two months at 26 percent 43 percent respectively.
Elsewhere, Greece could default on its debts unless a deal can be brokered with its creditors. Talks continue this week; eurozone finance ministers at a summit in Riga last week lambasted Greek counterpart Yanis Varoufakis for a lack of progress in critical reforms needed to secure funding.
The post Gold bounces above $1,200/oz following soft US data appeared first on The Bullion Desk.
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