Gold shrugs off weaker dollar, ECB says recovery on track

Otmane El Rhazi from The Bullion Desk.

Gold remained in negative territory in afternoon London trading despite the dollar making further losses on claims the eurozone recovery is on track.

The spot gold price was last down $2.50 on Tuesday’s close at $1,189.90/1,190.70 per ounce, having traded in a $9 intraday range so far.

The metal shrugged off a second day of sizeable falls in the dollar – it was last at 1.1267 against the euro, down more than a cent and its lowest in two weeks – after Mario Draghi said the eurozone recovery is on track and that the bank would be willing to do more to help lift the economy if needed.

The European Central Bank president also raised the bank’s eurozone inflation forecast for 2015 to 0.3 percent from 0 percent in its March predictions, lifting bond yields across the bloc slightly.

This coincided with punchy eurozone data that has helped underpin the gains – the unemployment rate at 11.1 percent was slightly better than the expected 11.2 percent and retail sales at 0.7 percent were in line with forecast and up from the previous month’s upwardly revised 0.6 percent.

The final services PMI in May at 53.8 was above the expected 53.3 and followed positive inflation data on Tuesday.

Greek Prime Minister Alexis Tsipras will meet European Commission president Jean-Claude Juncker in Brussels on Wednesday evening. The country looks set to make a first repayment of 300 million euros to the IMF on June 5, though it is unclear how it will pay off the rest of its debt. Still, there is increasing optimism that a deal with its creditors will be reached.

There was some positive data out of the US. The trade balance for May at -$40.9 billion was better than the forecasts -$43.9 billion, while the ADP non-farm employment change at 201,000 was slightly better than forecasts of 198,000.

But the ISM non-manufacturing PMI fell short at 55.7, as did the final services PMI at 56.2.

Earlier, China’s HSBC services PMI in May at 53.5 was better than the forecast 53.3.

In other metals, silver was last 17 cents lower at $16.58/16.63 per ounce, platinum slipped $3 to $1,106/1,111 and palladium was down $4 at $758/764.

(Editing by Mark Shaw)

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