Gold price consolidate as safe haven status wanes

Otmane El Rhazi from The Bullion Desk.

The gold price was steady on Thursday, as dollar strength continued to cap gains and the yellow metal remained under the psychologically important $1,200 level.

Spot gold was last at $1,188.80/1,189.50 per ounce, a $1.10 increase on the previous day’s close, as the metal was content to tread in well-worn ranges.

“Overall, we feel that a long-term base is being formed here, paving the way for the next bull leg in the super-cycle; but current conditions favour a slip to the lower end of the range,” Triland said in a note.

Meanwhile, the metal’s status as a safe haven asset waned today amid renewed optimism over Greece staying in the eurozone.

“News out of Greece that the two sides are closing in on a deal helped weaken the greenback against the Euro, but we still do not know for sure which way the wind is blowing on these talks, since the Greek assessment of things is far more encouraging than the European one. In any event, Greece has an IMF payment due on June 5, which it said it can service, but time is of the essence, as two more payments are due later in the month and it is unlikely the Greeks will be able to make those without some aid,” INTL FCStone analyst Edward Meir said.

Dollar strength is capping notable moves higher. The greenback was off yesterday’s one-month highs, but remained firm -last trade at 1.0940 against the euro.

In data, German import prices were positive at 0.6 percent. The rest of the agenda is fairly light with only US unemployment claims, pending home sales and building consents of note.

“The precious metals have pulled back in the face of the weak dollar and as record setting equities provide too big a pull for investor money, but the gold price is holding up relatively well as are silver and palladium. Given uncertainty over Greece and some nervousness in equities, we would expect good underlying support for gold,” FastMarkets analyst William Adams said.

Silver at $16.69/16.74 was little changed from the previous day’s $16.67. Platinum at $1,121/q,126 was up $5 and palladium was unchanged at $783.  

In other news, it was reported that South Africa’s Impala Platinum – the world’s second largest platinum producer – has cancelled plans to sell its Marula mine and now seeks to increase output with a long-term aim to produce 850,000 ounces of platinum by 2019.

“We do not attribute platinum’s dip to the Impala news but the market appears assured that despite long running deficits there is adequate material available to meet demand. That said we are of the view that any challenge of $1,100/oz is likely to trigger fresh trade and physical demand,” HSBC analyst James Steel said.

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