Gold price lacks upward impetus as dollar moves higher

Otmane El Rhazi from The Bullion Desk.

The gold price was hovering just above two-week lows on Wednesday morning, with the dollar shifting higher and the Chinese economy slowing more than expected.

Spot gold was last at $1,189.20/1,190.00 per ounce, down $2.70 on Tuesday’s close – it struck its lowest in two weeks at $1,184.00 in yesterday’s session.

“Precious metals continue their aimless meandering as the dollar remains the focus. A sell off in the greenback yesterday lifted prices temporarily, but dollar buying has resumed and precious metals are once again back in the doldrums,” Marex Spectron’s David Govett said.

The dollar has made sizeable gains this morning, reaching 1.0578 against the euro, just short of its highest in nearly a month.

Also playing on sentiment was poor Chinese data this morning. While the country’s quarterly GDP growth figure was on target at seven percent, it was the lowest figure in six years and should prompt further stimulus measures from the PBoC.

Other economic indicators underperformed market expectations also – year-on-year industrial production was at 5.6 percent, much lower than the projected 6.9 percent and also the lowest in six years.

In others, fixed asset investment was at 13.5 percent, lower than the forecast 13.8 percent, and retail sales at 10.2 percent were 0.7 percentage points lower than expected.

“It is now even more likely the PBoC will need to further cut interest rates to support the economy, but with credit levels very high in the economy, there will be limitations as to how much monetary policy can support the economy,” MKS said in a note.

“Market participants clearly believe that the Chinese figures mean lower economic growth and thus more subdued physical demand for gold.” Commerzbank noted.

Elsewhere, renewed suggestions of a possible ‘Grexit’ may well provide some support. Negotiations between Greece and its creditors are set to resume today, though a deal does not seem imminent while Athens apparently refuses to proceed with further austerity measures.

In other data today, the German CPI was as expected at 0.5 percent as was the French CPI at 0.7 percent. The eurozone’s February trade balance at 22 billion euros was slightly better than the expected 21.2 billion euros.

Still to come from the US are the Empire State manufacturing index, industrial production, capacity utilisation, the NAHB housing market index, crude oil inventories, the Beige book and TIC long-term purchases.

In the other metals, silver was three cents lower at $16.10/16.14 per ounce – it hit a near-four-week low in the previous session.

The platinum group metals have yet to react significantly to plans by Eskom, which provides 95 percent of South Africa’s electricity, to step up its rolling blackouts.

“Such concerns build onto the difficult environment PGM producers face in South Africa which also include rising wages, lower ore grades and inadequate infrastructure. We see these concerns as bullish for the PGMs,” HSBC’s James Steel said.

Still, platinum was just $1 higher at $1,147/1,152 per ounce while palladium was unchanged at $760/765.

(Editing by Mark Shaw)

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