The gold price struggled to gain any momentum on Monday, despite the likelihood of a delay to any US interest rate rises and news of further stimulus measures out of China over the weekend.
Spot gold was last seen at $1,184.50/1,185.30 per ounce, down $2.80 on the pre-weekend session and trading within a $6 range so far. In other metals, silver was down one cent at $16.40/16.45 per ounce, while platinum fell $2 at $1,136/1,141 per ounce, and palladium was unchanged at $795/800.
“The precious metals are consolidating in mid-ranges, the exception is palladium that is pushing higher having overcome resistance at $788. On balance, we feel there may well be a pick-up in demand for gold for safe-haven reasons given pullbacks in treasuries and bonds, the dollar and some signs of more jittery equity markets, but overall the precious metals markets seem in no hurry to rally,” FastMarkets analyst William Adams said.
The lack of movement follows mixed feelings over Friday’s non-farm payroll report in the US which showed that the country created 223,000 new jobs in April, up from a downwardly revised 85,000 in March.
While the figure suggests a return to healthy jobs numbers, according to JP Morgan the implied odds in federal funds futures show that there is just a seven percent chance the Fed will raise interest rates in July, compared with ten percent ahead of the jobs report. September odds are down from 27 percent to 22 percent, October from 45 percent to 38 percent and December from 62 percent to 55 percent.
The members of the Federal Reserve’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.
US labour data has taken and will continue to take precedence when it comes to the normalisation of monetary policy, as the Fed recently shifted its stance almost exclusively to data dependency, citing in particular jobs and inflation data.
Also over the weekend, the People’s Bank of China announced a 25 basis point reduction to its benchmark lending and deposit rates effective May 11 – although the gold market appears to have shrugged this off in anticipation of the move.
The deposit rate ceiling has also been raised from 1.3 times to 1.5 times the benchmark rate, with the one year lending rate now at 5.1 percent and one year deposit rate at 2.25 percent. The PBoC said in a statement that it was making the changes to counteract low inflation, also saying that real interest rates, adjusted for pricing changes, was at historically low levels.
In other data from China, the country’s CPI disappointed at 1.5 percent from forecasts of 1.6 percent, while the PPI came in as expected at -4.6 percent.
The statement and inflation data adds to a disappointing trade balance figure released towards the later stages of last week at at $34.1 billion in March, up from $3.1 billion in February but below the expected $34.5 billion. The data will add to the concern in Beijing that the seven percent growth target in 2015 may ultimtately prove too much.
Of note on Monday however is the big change to gold CFTC fund positions, showing that the bullish bets on the metal had dropped to the lowest since March. Gold net long fund positions dropped 28,817 contracts to 72,440 contracts due to 16,824 lots of long liquidation and 11,993 lots of short selling.
There is no real data of note to release on Monday, though many observers will be eyeing the eurogroup meetings for developments on the Greek bailout situation. Gold broker MKS noted this morning that gold could see some safe-haven related inflows as Greece is due to make a payment to the IMF of 770 million euros on Tuesday.
However, given the skepticism in some of the rhetoric from eurogroup finance ministers and those overseeing negotiations, further negative headlines may dampen the euro and ultimately add some pressure on gold.
(Editing by Kathleen Retourne)
The post Gold price shrugs off Chinese stimulus as CFTC longs plummet appeared first on The Bullion Desk.
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