Gold edges higher after Fed’s Evans preaches patience

Otmane El Rhazi from The Bullion Desk.

Gold futures are holding onto recent gains in the US on Monday morning on renewed Greek jitters and following further dovish comments from a Federal Reserve official.

Gold for June delivery on the Comex division of the New York Mercantile Exchange was last up $2.00 at $1,227.50 per ounce. Trade has ranged from $1,221.20 to $1,232.00.

“We remain friendly on gold, since in addition to constructive technicals, we see no change in our weaker dollar outlook; this in turn should continue to provide an element of support to commodities in general and to gold in particular,” INTL FCStone’s Edward Meir noted.

“Markets will also continue to keep their focus on Greece, where there seems to be no sign of progress and what seems to be a hardening of positions instead,” he added.

Two documents over the weekend shed light on the parlous state of Greece’s finances. In a leaked note, the IMF said it believes there is “no possibility” of Greece meeting its debt obligations over the summer unless bailout funds are unlocked.

In the other, Prime Minister Alexis Tsipras, in a letter to the IMF, warned that Greece is almost out of cash and would miss repayments unless the European Central Bank immediately raised restrictions on the country’s ability to issue debt.

Although Greece must implement heavy economic reforms to unlock a third aid package, Tsipras is reluctant to go back on anti-austerity promises made in his election campaign.

Here in the US, Federal Reserve Bank of Chicago president Charles Evans renewed his call for the US central bank to refrain from raising interest rates this year.

The members of the Fed’s policy board are locked in what has become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008.

At its last meeting, the Fed policy board removed all calendar references in its forward guidance and said that recent economic weakness might be “transitory” in nature. This means that bank is now entirely data dependent and a rate increase could happen at any future meeting.

In a speech prepared for delivery on Monday, Evans said that allowing inflation to rise above the two-percent target “made sense” to achieve growth targets more quickly.

“[Evans] is perhaps the most singularly dovish of all of the voters in the rota this year,” Dennis Gartman, editor of the Gartman Letter, said. “He has not surprised us, with his comment that the Fed should be reticent/slow to move to raise its o/n fund rate and that the recent gains in employment must be sustained. It is good not to be surprised.”

In wider markets, the dollar was last 0.54 percent stronger at 1.1387 against the euro, while Germany’s DAX was up 0.03 percent and France’s CAC-40 was down 0.7 percent.

As for the other precious metals, Comex silver for July delivery was up 5.7 cents at $17.620 per ounce. Trade has ranged from $17.475 to $17.775

Platinum futures for July delivery on the Nymex were up $1.20 at $1,170.30 per ounce, while the most-actively traded palladium contract was $794.20, down 75 cents.

(Additional reporting by Ian Walker, editing by Mark Shaw)

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