Gold lingers below $1,200/oz after Monday’s brief rally

Otmane El Rhazi from The Bullion Desk.

Gold futures returned to sideways trading in the US on Tuesday while the market waits for fresh headlines out of Greece.

Gold for August delivery on the Comex division of the New York Mercantile Exchange was last up $1.00 at $1,189.70 per ounce. On Monday, the yellow metal made a brief foray above $1,200 but there was little follow-through and the price quickly retreated.

“We were a bit surprised by the sharp rally mid-morning here in the US yesterday, and at this point we’ve no explanation other than a sharp shift in the animal spirits that can dominate the market from time to time,” Dennis Gartman, editor of the Gartman Letter, said.

“The animals were spirited; then they were not. There really is nothing more we can or should say,” he added.

Perhaps one of the reasons why the gold price was unable to defend the $1,200 mark, apart a strong dollar, was another round of outflows from exchange-traded fund (ETFs), Commerzbank noted.

“Holdings in the gold ETFs were reduced by 2.4 tonnes yesterday and fell below 1,600 tonnes again for the first time since mid-January,” the broker said. “In other words, the outflows in May – a good 23 tonnes were withdrawn – appear to be continuing this month too.”

Meanwhile, Greeks and officials from the ECB and the IMF remain locked in negotiations – while the country looks set to make a first repayment of 300 million euros to the IMF on June 5, it is unclear how it will pay off the rest of its debt.

“If anything, the Greek position may be turning a bit more hardline, as the country’s lead negotiator appointed to talk to the IMF was replaced by an official more palatable to the Syriza party,” INTL FCStone’s Edward Meir said.

In today’s data, the Spanish unemployment change at -118,000 was slightly better than expectations and while Germany’s jobless total only fell by 6,000 last month – below the expected drop of 10,000 – the national unemployment rate of 6.4 percent is a record low.

The EU CPI flash estimate and the core CPI flash estimate were both positive at 0.3 percent and 0.9 percent respectively – inflation returned to the bloc for the first time in six months, suggesting the ECB’s stimulus programme is starting to take effect, with the economy avoiding a slide into deflation that previous data had suggested.

But the eurozone PPI undershot at -0.1 percent. Later, factory orders and total vehicle sales are due from the US.

In wider markets, the euro was one percent stronger at 1.1038 against the dollar, while Germany’s DAX and France’s CAC-40 were down 0.75 percent and 0.03 percent respectively.

As for the other precious metals, Comex silver for July delivery was up one cent at $16.690 per ounce. Trade has ranged from $16.620 to $16.760.

Platinum futures for July delivery on the Nymex were up $6.30 at $1,110.50 per ounce, while the most-actively traded palladium contract was at $774.85, up $2.10.

(Editing by Mark Shaw)

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