The gold price fluctuated around $1,200 on Friday morning in Europe, with the dollar in focus and likely to remain a headwind for the precious metal.
The spot gold price was last at $1,200/1,201 per ounce, up $5.80 on yesterday’s close but having been as low as $1,193 in Asian trading hours.
“Precious metals have been knocked back by the stronger dollar and we expect the direction of the dollar to remain all important for the metals,” FastMarkets analyst, William Adams, said.
The dollar index remains strong at around 99.25 – the highest it has been in around three weeks. The US currency has gained following the release of the mildly hawkish minutes from the March meeting of the US Federal Open Market Committee (FOMC) earlier this week.
These revealed that several members of the policy board judged that the economic data and outlook were likely to warrant beginning normalization of monetary policy at its June meeting.
“[The dollar's strength] is not because a rate rise is imminent, but because the Fed is seemingly still on course to raise at some point this year or next. No matter when it happens, it will be a negative factor for precious metals and buying them now has very little point,” a note from broker Marex Spectron said.
“The overall trend is still downward and buying rallies in this market is a sure fire way to lose money. Business as a whole in precious metals is fairly dreadful at the moment and I don’t really see that changing for the time being,” it added.
An absence of geopolitical headlines also kept gold volatility low, ANZ noted, while physical demand is weak, which HSBC said may account for the lacklustre price response following gold’s decline below $1,200.
Still, the latest forecast-beating data from China this morning has provided some cheer – its CPI held steady in March at 1.4 percent but beat the expected 1.3 percent. While the PPI remains in negative territory, there was an improvement from the previous -4.8 percent to -4.6 percent.
“The fact CPI is positive is important as deflation is not reaching consumers/households yet,” Adams said.
The French government budget balance came in at 23.4 billion euros, better than from the previous reading of -9.4 billion euros, while French industrial production at 0.0 percent was better than the expected -0.1 percent. Data out later includes US import prices and the Federal budget balance.
In the other metals, silver was last at $16.44/16.49 per ounce, down $0.27. Platinum at $1,165/1,170 was up $14 and palladium at $767/772 increased $7.
Providing support to palladium was news that Russia plans to extend a 6.5-percent export tax on PGM ingots and sponge as well as news that Norilsk may set up an investment fund looking to buy up to $2 billion worth of palladium.
(Additional reporting by Lynette Tan, editing by Mark Shaw)
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