Gold price struggling to make any moves despite weaker dollar

Otmane El Rhazi from The Bullion Desk.

The gold price remained effectively unchanged in early-morning trading despite the dollar reaching its lowest in two weeks.

Spot gold was last down 20 cents at $1,184.20/1,185.00 per ounce, having traded in a tight $6 intraday range so far.

The dollar was last at a soft 1.1348 against the euro – the recovery in Europe looks to be on track, propping up the single currency.

On Wednesday, European Central Bank president Mario Draghi said the bank would be willing to do more to help lift the economy if needed. He also raised the bank’s eurozone inflation forecast for 2015 to 0.3 percent from 0 percent in its March predictions.

But the increased likelihood of Greece reaching a deal with its creditors may be weighing on the market.

“Precious metals are edging lower despite the weaker dollar and gold looks on course to retest support at $1,180, with further potential support at $1,170,” FastMarkets analyst William Adams said.

Prime Minister Alexis Tsipras reportedly rejected proposals put together by its lenders, arguing that any deal to unlock crucial bailout funds must be based on his own side’s conditions. But the two sides remain “very close” to agreeing a deal, Tsipras said, after creditors supposedly proposed lower primary surplus goals.

“Optimism over Greece may be weighing on prices and the correction in the bond market might be worrying investors – higher yields will offer a better investment once the rout in bonds has run its course,” Adams added.

“We would not have been surprised to see some rotation from bonds to bullion during the correction, especially as the dollar is weaker, but that might be a secondary reaction,” he said.

Still, many participants may be waiting on the sidelines ahead of Friday’s crucial US jobs report – data from the country has increased importance while observers seek signs of a rebound in the second quarter.

Labour market data in particular was cited by the Federal Reserve as one of the key factors on its decision when to raise interest rates from near zero, where they have been since 2008.

Friday’s report is forecast to show that the US created 226,000 new jobs in May, up from 223,000 previously, while the unemployment rate is predicted to remain at 5.4 percent.

In other data today, the eurozone retail PMI came in at 51.4, the first time the number has not been below 50 since July 2014. Weekly unemployment claims figure, Challenger job cuts and revised non-farm productivity are due from the US later.

Other metals were similarly flat – silver was last up two cents at $16.45/16.50 per ounce, platinum rose $5 to $1,103/1,108 and palladium was $3 higher at $754/760.

(Editing by Mark Shaw)

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