Dip-buying buoys gold but market still lacks conviction

Otmane El Rhazi from The Bullion Desk.

Gold futures crept up towards $1,200 per ounce on Tuesday as last week’s sell off prompted some dip-buying; nevertheless, the market remains locked in a well established range as investors’ mood sway from indecision to indifference.

Gold for June delivery on the Comex division of the New York Mercantile Exchange was last up $10.20, or 0.9 percent, at $1,197.00 per ounce. Trade has ranged from $1,184.90 to $1,198.10.

“The old adage of buying gold when it looks awful and selling it when it looks great has worked extremely well as of late and I will continue to do this for the time being. At some stage we will see a concerted move one way or the other, but with the lack of interest in the market, it may take a while,” Marex Spectron’s David Govett

In today’s numbers, Spain’s unemployment change at -118,900 was better than expected but the EU PPI underperformed at 0.2 percent. The US trade balance, final services PMI and IBD/TIPP economic optimism are due later but non-farm payroll data on Friday will be the main event alongside Chinese trade balance numbers.

“Ahead of these, I would expect to see more of the same from the precious complex with the market dipping and rallying as the dollar and the stock markets move and as any Fed member makes a pronouncement,” Govett said.

Yesterday afternoon, Chicago Fed President Charles Evans said that the US central bank should not rush into raising interest rates because inflation is still too low and unemployment too high.

“I likely will not feel confident enough to begin to raise rates until early next year,” Evans said, adding that there aren’t “any serious costs of modestly overshooting our inflation target” but that there are major economic risks in prematurely hiking rates.

In gold specific data, CFTC reported that the net position in Comex gold was down a modest 70,000 ounces last week as small increases in gross shorts were partially offset by a similarly small increase in gross longs.

“At 11.53 million ounces, gold positioning remains relatively light at 35 percent of the all-time high,” UBS analyst Edel Tully said. “The muted changes in market length over the last three weeks – averaging 240,000 ounces each week – betrays the lack of clear direction in the market and limited conviction levels among investors,” Tully said.

In the wider-markets, the dollar was near unchanged at 1.1139 against the euro, while the Dow Jones industrial average and S&P 500 were 0.16 percent and 0.23 percent respectively.

As for the other precious metals, Comex silver for July delivery was last up 21.9 cents at $16.660 per ounce. Trade has ranged from $16.345 to $16.705.

Platinum futures for July delivery on the Nymex was up $4.50 at $1,155.40 per ounce, while the most-actively traded palladium contract was at $793.00 per ounce, up $10.35.

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