Gold price tracks euro higher, palladium around at 2-mth lows

Otmane El Rhazi from The Bullion Desk.

Gold inched higher on Tuesday morning while the dollar lost some ground against the euro, offering some support for precious metals.

The spot gold price was last at $1,175.80/1,176.50 per ounce, up $3 on Monday’s close. The metal has traded in a sub-$8 range so far today, peaking earlier at $1,181.80.

Despite growing speculation that the US Federal Reserve could bring forward the date on which it starts to raise interest rates form near-zero levels after strong US jobs data suggested the first-quarter slowdown was a blip, the dollar slid on reports that US President Barack Obama said the strength of the greenback could be ‘a problem’.

Although the White House rebuffed those reports, the dollar slipped back below 1.13 against the euro.

“With the dollar now slipping again and with some of the other markets looking a bit toppy, it may be that the precious metals look relatively cheap as a safe-haven asset class should investors feel the need for a haven,” FastMarkets analyst William Adams said.

Asian physical demand, which traditionally materialises on declining prices, has been absent recently, James Steel at HSBC noted.

“This leads us to believe that a push lower for gold from the paper markets may not be immediately met with physical buying. However, we believe demand may resurface should prices maybe begin to surface if gold drops below $1,150 and increases if bullion falls closer to the psychological $1,100 level, he said.

Headlines out of Greece continue to dominate sentiment amid concerns the country will exit the eurozone – the so-called Grexit. Still, recent developments have started to improve sentiment.

Today, Athens has submitted a new reform proposal in which it asks the European Stability Mechanism – Europe’s main bailout fund – to swap 6.7 billion euros for Greek bonds held by the ECB.

It also called on the ECB to raise the limit on short-term borrowing, which would allow Greek banks to buy more of the country’s debt.

In return, it will raise some VAT rates and set a primary supply target closer to its creditors’ one-percent target.

In data, China’s CPI and PPI for May both undershot at 1.2 percent and -4.6 percent respectively – readings of 1.3 percent and -4.5 percent had been expected. Forecast-missing numbers suggest that the Chinese economy is stalling, making fresh stimulus measures from China’s central bank likely.

From Japan, consumer confidence at 41.4 was below the expected 41.9. In the EU, revised first-quarter GDP growth of 0.4 percent was in line with forecast.

In the other precious metals, palladium dropped to two-month lows at $742 in yesterday’s session but it has settled slightly higher today – it was last at $745/750 per ounce.

Platinum at $1,111/1,116 per ounce was up $1 while silver was back above $16 at $16.10/16.16 against the previous day’s close of $15.94.

(Editing by Mark Shaw)

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