Gold price locked sideways, market awaits US GDP

Otmane El Rhazi from The Bullion Desk.

The gold price was locked in a narrow sideways range in early-morning trading on Friday, with the market looking ahead to the US GDP reading due this afternoon.

Spot gold was last at $1,189.40/1,190.20 per ounce, up $1.50 on Thursday’s close but confined to a tight $3 intraday range so far.

The second estimate for first-quarter US growth is forecast at -0.8 percent, down significantly from 0.2 percent in the first reading, which missed the estimated reading of 1.0 percent.

While contraction is now largely priced into the dollar, a reading worse than -0.8 percent may well extend the greenback’s losses from 1.0972 against the euro.

“Although a lower reading is forecast, it might well prompt a correction in the dollar as the market expects the Fed to delay a rate rise,” FastMarkets analyst William Adams said.

Poor data could dissuade the US central bank from subsequent rate rises after initial normalising monetary policy some time later this year, INTL FCStone analyst Edward Meir said.

The market is also awaiting signals from Brussels where Greece is meeting with creditors again today to thrash out deal to secure the funding it needs to service its debts. But the country’s inability to implement the reforms on VAT rates, pensions and budget targets has seen negotiations falter for the last few weeks.

Greek officials have sounded optimism that it will be able to agree a deal by the end of the week, though International Monetary Fund Managing Director Christine Lagarde has warned Athens is unlikely to agree any deal in the next few days and that “a Greek exit is a possibility”.

The June 5 deadline for a 305-million-euro payment to the IMF is fast approaching – the country owes 1.6 billion euros to the IMF in total next month.

Worries about Greece pressured most European stock markets lower – while the FTSE 100 edged higher, the Dax and CAC 40 were both down more than 0.2 percent.

In other data today, German retail sales at 1.7 percent bettered expectations, while French consumer spending dropped short at 0.1 percent.

Italian GDP at 0.3 percent was the first quarter of growth since the autumn of 2013 but the strength of the Swiss franc pushed Switzerland into contraction in the first three months of the year at -0.2 percent.

As well as the GDP reading, the Chicago PMI and a revised University of Michigan report on consumer sentiment are also due from the US later.

Silver was five cents higher at $16.72/16.77 per ounce and platinum gained $5 at $1,115/1,120 per ounce while palladium slipped $1 to $778/783.

(Editing by Mark Shaw)

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