No direction in gold price for now but break lower looms – ANZ

Otmane El Rhazi from The Bullion Desk.

There is a distinct lack of a consensus view on gold at present but forthcoming US data will force gold down to $1,100, ANZ said.

“‘Lacking conviction’, ‘neutral’ or ‘waiting for a signal’ – any of those phrases can describe the apathy that seems to be permeating the gold market at the moment,” the bank said in a note on Wednesday.

Spot gold is currently trading around $1,202 per ounce, up around 1.2 percent from $1,189 at the start of the year. The metal has been confined to tight ranges of late while the market searches for a catalyst to move either side of $1,200.

But its next direction will depend on an evolution in US data that will ultimately play into the dollar’s hands, ANZ predicted.

Recently, US data has been subdued, making a delay to the normalisation of US monetary policy likely and pushing the dollar to its lowest in two months against the euro at 1.125 earlier today.

The US economy grew at an annual rate of 0.2 percent in the first quarter of this year, below the expected 1.0 percent and down from 2.2 percent in the fourth quarter of last year.

Still, ANZ expects gold to be at $1,100 by the end of June and $1,150 by September, although it has a full-year price forecast of $1,225.

A rebound in US non-farm payrolls to around 200,000 on May 8 is crucial, the bank said. Slack in the labour market, particularly the lack of wage growth, appears to have steadied the Fed’s hand in normalising rates so far.

“The market may look to this as the next catalyst to push gold out of its quagmire,” it said.

But the current hiatus in gold is also evident in the physical markets – premiums are weak across the major markets.

China’s imports of gold via Hong Kong fell to a seven-month low of 66 tonnes in March, though India’s imports last month at 134 tonnes were double the year-ago level.

“The strength in India’s imports is likely to be temporary though, as we are in peak demand season in India and it comes on the back of the lifting of import restrictions in December,” it said.

Demand for gold as a safe-haven asset is providing minimal support despite Greece’s debt woes and the country’s potential exit from the eurozone.

“But markets are also saying it is a Greece problem, not a Europe problem, but only the actual event occurring will test if this is the case. This remains on everyone’s radars, but so far contagion risk looks contained,” the bank added.

(Editing by Mark Shaw)

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