The gold price has handed back almost all of the gains made in the previous session when it hit a one-week high on dovish speeches on the state of the US economy.
Spot gold was last at $1,187/00/1,187/80 per ounce, down $1.10 on Monday’s close but significantly lower than that session’s peak of $1,204.40.
“The precious metals look vulnerable after yesterday’s failed upside spikes but it is interesting that, when the buying did turn up, prices moved fast. Still, the lack of follow-through buying suggests the energy for yesterday’s run higher came mainly from short-covering,” FastMarkets analyst William Adams said. “On balance, we would not be surprised if prices work lower.”
The metal spiked late on Monday after Federal Reserve vice chairman Stanley Fischer warned that it would be a mistake to believe that financial crises are at an end.
Sluggish inflation figures also weighed. The core April PCE price index at 0.1 percent was below the expected 0.2 percent, with the annualised figure at 1.2 percent, down from 1.3 percent previously.
The figure is below the Fed’s two-percent target in an area that has been directly cited as a contributing factor for whether or not the country will raise interest rates.
“Gold will be influenced by more economic releases this week, the most important being the jobs report for May to be issued on this Friday,” HSBC’s James Steel noted.
Participants will scrutinise the report for clues as to when the US may raise interest rates, particularly for indications of a rebound in the labour market in the second quarter, which will also be a leading contributing factor to the Fed’s decision.
The current consensus is that the US created 226,000 jobs in May, up from 223,000 previously, while the preliminary ADP report on Wednesday is seen at 200,000.
Any developments in the Greek debt negotiations could also move the bullion markets “especially if the talks create additional uncertainty”, Steel added.
The heads of the International Monetary Fund and the European Central Bank, German Chancellor Angela Merkel, French President Francois Hollande and European Commission head Jean-Claude Juncker have met to discuss a “final proposal” ahead of Greece’s Friday deadline for a 300-million-euro payment to the IMF.
Still, a lack of volatility in the currency markets has confined gold to an intraday range of $4.
Eurozone inflation figures at 0.3 percent beat the expected 0.2 percent pushed the dollar to a session low of 1.0994 against the euro – inflation returned to the bloc economy for the first time in six months, suggesting the ECB’s stimulus programme is beginning to take effect, with the economy avoiding a slide into deflation that previous data suggested.
The core figure, which strips out volatile elements, at 0.9 percent also bettered consensus at 0.6 percent.
And although 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.
In other news, the Reserve Bank of India (RBI) lowered its key repo rate to 7.25 percent from 7.5 percent – the third cut to interest rates this year – to boost its economy as the annual monsoon season nears.
Other metals were similarly rangebound – silver was last down two cents at $16.68/16.73 per ounce, while platinum was up $4 at $1,103/1,108 and palladium was $3 higher at $770/775.
(Editing by Mark Shaw)
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