Gold price moves back above $1,200 on dollar stagnantion

Otmane El Rhazi from The Bullion Desk.

The gold price continued to make modest gains in early Friday trading, with the dollar weakening on dovish comments from the Atlanta Federal Reserve president.

Spot gold was last up $6.80 on the previous session’s sub-$1,200 close at $1,204.50/1,205.30 per ounce, just off intraday highs.

“The recent consolidation in the precious metals that has led to weaker prices seems to be over and prices are once again trying to climb; while the dollar is weaker, this may well continue. But the precious metals have not broken higher yet, unlike most of the base metals,” FastMarkets analyst William Adams said.

The dollar was last at 1.0832 against the euro, down another half a cent, following comments from Dennis Lockhart, president of the Atlanta Fed – he said that recent “murky” economic data might not create the ideal environment to make major policy decisions.

Data out of the US over the coming months has increased precedence because the Federal Reserve is on the verge of raising interest rates. The current market consensus is that rates will rise in the second half of this year, although this is a moving target that will be dictated by jobs and inflation data.

The dollar may well fluctuate during the session, with US consumer inflation data due this afternoon.

“Until upcoming economic data makes the US rate picture a little more clear, we believe gold is likely to remain stuck in choppy directionless trading,” HSBC’s James Steel said.

Observers will keep a close eye on Greece – renewed fears that the country may not meet its financial obligations emerged following comments from IMF managing director Christine Lagarde at the IMF Spring Meeting in Washington. Any further doubts are likely to bolster gold’s credentials as a safe haven.

Physical demand ahead of the Hindu festival of Akshaya Tritiya on Tuesday is likely to add support, with April 21 set to be one of the most auspicious days in the Indian calendar to gift gold.

According to local reports, government trading agency MMTC is aiming to increase gold imports to 50 tonnes this fiscal year from 30 tonnes previously due to the relaxation of the 80:20 rule late last year that had made it mandatory to export 20 percent of all imported gold.

In other metals, silver followed gold higher to $16.42/16.47 per ounce, up 17 cents. The PGMs were also performing modestly, with platinum up $11 at $1,163/1,168 and palladium $4 higher at $779/784.

Eskom, the state-owned power producer that is responsible for 95 percent of South Africa’s electricity, rationed power supply for fifth day in a row on Thursday.

“This is an attempt on the part of Eskom to protect the power grid from collapsing because reduced power generation capacities are currently available due to scheduled and unscheduled outages. Industrial companies in particular are therefore required repeatedly to curb their power consumption for a time, which is hampering production,” Commerzbank said.

(Editing by Mark Shaw)

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