Gold price poised above lowest this year, outlook gloomy

Otmane El Rhazi from The Bullion Desk.

Gold was again hovering just above its lowest this year on Friday morning while dollar is near two-month highs against the euro.

The spot gold price of $1,143.40/1,144.20 per ounce was down $1.20 on Thursday’s close although trading is dull – the metal has been confined to an intraday range of just $3 so far. It hit its lowest since November 2014 in the previous session at $1,142.70

“Gold is on the rocks,” FastMarkets analyst William Adams said. “Rebounds remain feeble and sentiment is washed out.”

The dollar hit its strongest since May 27 at 1.0880 against the euro, underpinned by comments from Federal Reserve chair Janet Yellen, who reaffirmed that a tightening of monetary policy would still be appropriate this year assuming that the US economy develops as expected.

Gold looks increasingly susceptible to dropping below yesterday’s lows and testing what would be a five-year low at $1,131.60.

“The entire precious metals sector remains under pressure, partly because of the firm US dollar,” Commerzbank said.

Greece is also weighing on gold and creating a gloomy outlook, it added. The likelihood of a Greek exit from the eurozone is fading after the European Central Bank raised the upper emergency liquidity assistance limit on Greek banks, guaranteeing liquidity on a short-term basis. This could see their doors reopen as early as next week.

“This simultaneously serves to further reduce gold’s attractiveness as a safe haven,” Commerzbank added.

Silver was last down two cents at $14.95/15.00 per ounce and platinum and palladium also continue to struggle, with platinum in particular looking increasingly fragile just above $1,000. It was last $4 lower at $1,002/1,007 – platinum has not traded below $1,000 in six years.

Palladium was last $2 softer at $624/629 per ounce, at November 2012 lows. Both metals are ignoring a 14.6-percent year-on-year increase in European auto sales last month.

“This is due to a big increase in supply, not only from the mines but also from scrap, coupled with a gloomy outlook for the Chinese and European car market,” Marex Spectron’s David Govett said.

In other markets, the CSI 300 closed up 3.86 percent on reports that the scale of potential support from the Chinese government for country’s equities markets may be much larger than previously indicated. The Nikkei closed up 0.25 percent and the Hang Seng 1.21 percent but European markets opened slightly lower.

In data, building permits, housing starts, the University of Michigan’s consumer sentiment report and consumer inflation figures are due from the US later and may provide some impetus.

(Editing by Mark Shaw)

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