Gold price moves higher on poor US data, weaker dollar

Otmane El Rhazi from The Bullion Desk.

The gold price climbed higher on late Tuesday afternoon following disappointing data from the US and the further weakening of the dollar.

Spot gold was last at $1,212/1,213 per ounce, up $10.50 on Monday’s close. Trade has ranged from $1,199.30 to $1,214.3.

In US data this afternoon, CB consumer index disappointed at 95.2 from the expected 102.6 and Richmond manufacturing index at -3 was worse than the forecast of -2.

This is the latest in a series of lacklutre data from the US – yesterday the US flash services PMI missed consensus at 57.8.

The dollar index, meanwhile, was last at 96.10, the lowest since March 5.

Market participants now await the Federal Open Market Committee (FOMC) statement from its two-day meeting that kicks off today.

The statement will be read closely for clues on its thinking of normalising monetary policy. While higher rates are not yet expected, the developing inflationary environment may well prompt comments from Fed chair Janet Yellen.

Inflation and slack in the labour market are the two factors that will guide the Fed’s hand in normalising monetary policy.

Also tomorrow will see the release of the first reading on US first-quarter GDP number.

“Dollar weakness, ahead of the expected downward revision to the US first-quarter GDP growth from 2.2 percent to 1.0 percent, has further reduced downside pressure helping to support metal prices following their recent runs higher,” Tom Moore, FastMarkets analyst, said.

In Europe, markets benefitted from news of the Greek government reshuffling their negotiating team, side-lining finance minister Yanis Varoufakis after he was heavily criticised at a summit of eurozone finance ministers last week for a lack of progress in critical reforms needed to secure funding. Greece could default on its debts unless a deal can be brokered with its creditors.

In the other precious metals, silver was last at $16.56/16.61, up two cents. Platinum at $1,152/1,158 increased $12, while palladium was largely unchanged at $775/780.

(Editing by Tom Jennemann)

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