Gold jumps above $1,200, Fed’s Fischer issues economy warning

Otmane El Rhazi from The Bullion Desk.

Gold jumped above the key psychological $1,200 level on Monday afternoon after dovish comments from Federal Reserve vice chairman Stanley Fischer on the US economy.

The spot gold price was last at $1,201.50/1,202.30 per ounce, up $12 on Friday’s close and having earlier hit its highest in a week at $1,204.50. Silver also jumped to a one-week high – it was last at $17.05/17.10, up 35 cents.

The metal spiked higher from around $1,185 after Fischer warned that it would be a mistake to believe that financial crises are at an end.

“One reason we should worry about future crises is that successful reforms can breed complacency about risks,” he added.

But the precious metals are off session highs after US ISM manufacturing data came in at 52.8, better than the expected 51.9. This supports the theory that the sluggish growth in the first quarter was the result of poor weather conditions and may not affect the second quarter as some had feared.

As well, US construction spending at 2.2 percent beat the expected 0.7 percent while ISM manufacturing prices at 49.5 were stronger than the consensus reading of 43.0.

“Since the rally, gold prices have run into some selling – a good US manufacturing PMI and construction data have provided a headwind. A strong close would remove the earlier vulnerable feel to the market,” FastMarkets’ William Adams said.

Positive growth in the second quarter in aspects such as manufacturing, inflation and the labour market may well allow the Fed to continue with the prospective normalisation of monetary policy in September.

The dollar gained – it last seen at 1.0925 against the euro, up 0.6 percent. This puts gold’s position above $1,200 in jeopardy – the metal may well drop back below this level as the European session comes to a close.

In earlier data, personal spending fell short at 0 percent, as did the core PCE price index at 0.1 percent, but personal income bettered expectations at 0.4 percent.

The PGMs were mixed – platinum rebounded from multi-month lows to $1,114/1,119 per ounce, up $12, while palladium was $3 higher at $774/779.

 

(Editing by Mark Shaw)

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