Gold flat, dollar movement key to direction

Otmane El Rhazi from The Bullion Desk.

Gold futures came off the session high on Friday after US inflation data was a little hotter than expected, which led to a dollar rally. 

Gold for June delivery on the Comex division of the New York Mercantile Exchange was down $1.20 at $1,202.9 per ounce. Trade has ranged from $1,201.0 to $1,214.6.

In US data, April CPI month-over-month was in-line with forecasts of a 0.1 percent increase, while Core CPI month-over-month for April was up 0.3 percent, above the 0.2 percent estimates.

“The higher the (core) inflation rate turns out to be, the sooner the US Federal Reserve is likely to be willing to raise interest rates,” Commerzbank said. “This could put pressure on the gold price during the course of the day.”

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 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.

The dollar was 0.7 percent stronger at 1.1032 against the euro, while the dollar index was at 95.8870, up 0.7 percent. The euro was stronger during the European trading session, until CPI data was released, which sent the dollar surging forward.

The Chinese leading index at 1.1 percent was up from 0.5 percent previously. From the eurozone, German final GDP was as expected at 0.3 percent while the country’s Ifo business climate was better than the forecast at 108.5. Italian retail sales undershot at -0.1 percent.

In world equity markets, the Dow Jones industrial average and S&P was unchanged and up 0.2 percent respectively, while Germany’s DAX and France’s CAC-40 were down 0.2 percent and up 0.1 percent respectively.

As for the other precious metals, Comex silver for July delivery was down more than one cent to $17.015 per ounce.

Trade ranged from $16.940 to $17.335.

Platinum futures for July delivery on the Nymex were down $5.80 at $1,146.50 per ounce, while the most-actively traded palladium contract was at $771.85, down $4.25.

(Editing by Tom Jennemann)

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