The gold price was under pressure on Tuesday morning, retreating from three-month highs on a resurging dollar and strong outflows from exchange-traded funds (ETFs).
Spot gold was last at $1,218.00/1,128.80 per ounce, down $6.50 on Monday’s close – it hit $1,232.50 on Monday, a fresh high since February 17. Silver moved off the January 29 high it hit in the previous session and was last down 30 cents at $17.38/17.43.
The dollar has risen more than 2.5 percent against the euro in the last two sessions to 1.1170 from three-month lows of 1.1466 despite speculation that the US slowdown in the first quarter may well stretch into the second and ultimately stay the Fed’s hand when it comes to the normalisation of US monetary policy.
For now, strong equity markets are adding to that downside pressure. The S&P 500 and Dow closed at record highs again on Monday, while this morning the Nikkei closed up 0.68 percent and the Hang Seng 0.37 percent. The Euro Stoxx was last up 2.03 percent, the CAC 2.05 percent and the DAX 1.86 percent.
“The run-up in the gold price has been strong but resistance has now been encountered so some consolidation seems likely. With equities booming and the dollar trying to rebound, gold may well pull back for a while,” FastMarkets analyst William Adams said.
A similar story is playing out in the PGMs, with platinum down $9 at $1,162/1,167 per ounce and palladium unchanged at $782/787. But news that European car registrations were up 6.9 percent in April and 8.2 percent in the first four months of the year “points to robust demand for platinum and should lend corresponding support to the price”, Commerzbank said.
In ETFs, the consistent outflows continue – in the funds tracked by FastMarkets, gold holdings fell for the fourth consecutive day on Monday, falling 195,550 ounces to 51,590,648 ounces. In silver, holdings reached their lowest in 2015 at 19,065 tonnes, also the fourth consecutive session of outflows.
“Renewed sizeable ETF outflows were no doubt part of the reason why the gold price was unable to defend its gains,” Commerzbank also noted on Tuesday.
But the PGM ETFs have been consistently building for some time now although they edged lower on Monday to 2,575,169 ounces in platinum and 2,969,847 ounces in palladium.
In data, the German ZEW economic sentiment figure and final consumer inflation figures for the eurozone are due before US building permits and housing start figures this afternoon.
But the Fed minutes on Wednesday will be watched for gold’s direction. Should there be any indications of the perceived continuation of a sluggish economy in the second quarter, gold’s may well continue return to recent three-month highs.
(Editing by Mark Shaw)
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