Gold price stuck in tight range, market looks for catalyst

Otmane El Rhazi from The Bullion Desk.

The gold price sustained light losses in Wednesday morning trading while markets appear stagnant in search of the next catalyst.

Spot gold was last at $1,199.20/1,200.00 per ounce, down $3.20 on Tuesday’s close, having traded in a tight $6 intraday range thus far. Other metals were similarly set – silver was last up two cents at $16.00/16.05 while palladium was up $1 at $765/770 and platinum was down $7 at $1,139/1,144.

Currently, with no real near-term catalyst to drive the market either side of $1,200, gold remains stuck in its recent range of $1,185-1,215.

Market participants will look ahead to next week’s FOMC minutes and any developments in Greece for direction.

While the prospect of Greece’s exit from the eurozone – the so-called ‘Grexit’ – should bolster gold’s credentials as a safe-haven investment, the strong dollar is capping gains. The US currency was last down 0.5 percent at 1.0791 against the euro.

“We wait to see if the dollar weakens further; if it does, we would expect the metals to pick up,” FastMarkets analyst William Adams said.

With Greece still yet to submit a list of reforms to its creditors and in increasing danger of running out of money to service its debts, the prospect of a Grexit continues to overshadow the markets.

Still, contagion risk has been dampened somewhat by comments from ECB vice president Vitor Constancio, who suggested that Greece might not be forced to leave the eurozone just because its defaults on its debt.

Once again, a quiet day for data may well equate to another low-volatility session although the pace should pick up on Thursday when a spate of manufacturing data is due from the world’s major economies.

In other markets, equities in Europe are in negative territory. Yesterday the Dow closed down 0.47 percent, as did the S&P 500 at 0.15 percent. This morning in Asia, equities were slightly stronger, with the Nikkei closing up 1.13 percent and the Hang Seng 0.3 percent.

So far, initial indications out of India suggest that physical demand in the wake of the Hindu festival of Akshaya Tritiya was not as strong as some were expecting due to unseasonal storms hitting some agricultural production.

“The bulk of India’s gold demand is derived from the rural area from which agriculture plays an important source of income for many farmers,” HSBC’s James Steel noted.

Local premiums were said to have been muted – imports of around 125 tonnes in March and a mooted similar number in April may well have weighed.

(Editing by Mark Shaw)

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