Gold price under pressure, markets braced for data-heavy day

Otmane El Rhazi from The Bullion Desk.

Gold edged lower on Wednesday morning, with the market remaining nervous over the Greek debt crisis and a flurry of data.

The spot gold price slipped $3.70 from the previous session’s close to $1,188.80/1,189.60 per ounce, having traded as high as $1,195.60 earlier.

“The market is very nervous but there are many that are itching to do something – don’t be surprised to see small spikes off any news at all,” one trader told FastMarkets.

For now, the market will watch headlines on the Greek debt crisis. Its creditors are reportedly close to finalising a draft agreement, giving Athens access to the funds it desperately needs to service its debts and avoid an exit from the eurozone – the so-called Grexit.

Prime Minister Tsipras heads to Brussels today to review a “final proposal” from its lenders ahead of the June 5 deadline for a 300-million-euro repayment to the IMF. A Greek parliamentary spokesman said that the country will not make this repayment without a deal in place.

The dollar has strengthened to 1.1117 against the euro on the uncertainty although European bond yields improved on Tuesday – German bond yields surged 16 basis points to 0.68 percent, the biggest leap in nearly three years, thanks to comparatively punchy eurozone inflation numbers.

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.

The gives today’s ECB press conference added precedence – investors will focus on comments from president Mario Draghi over heightened inflation expectations.

“If the higher inflation rate proves lasting, the ECB may not after all pump as much liquidity into the market as it had announced. Market participants will be keeping an eye on the ECB’s meeting today, though we do not expect it to send out any new signals to the markets,” Commerzbank said in a note.

In other data today, China’s HSBC services PMI climbed to 53.5 from the previous 52.9 and was higher than the expected 53.3.

The French and German final services PMI came in stronger than expected but the Italian and Spanish services PMIs undershot.

The EU unemployment rate at 11.1 percent was slightly better than the expected 11.2 percent thanks in part to a forecast-beating Italian reading and EU retail sales at 0.7 percent were in line with forecast and up from the previous month’s upwardly revised 0.6 percent.

Later, the ECB will release its minimum bid rate before the ADP non-farm unemployment change, trade balance, the final services PMI and ISM non-manufacturing PMI numbers are due from the US.

In the other metals, silver was last down 15 cents at $16.61/16.66 per ounce, platinum was unchanged at $1,108/1,113 and palladium was down $4 at $759/764 despite punchy US auto sales data.

(Editing by Mark Shaw)

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