Gold prices recover from five-year lows but sentiment jittery

Otmane El Rhazi from The Bullion Desk.

Precious metals are mostly up on Asian trading hours on Tuesday after the complex reached bottom at multi-year lows on Monday morning – markets closely watching Fed’s rates hikes.

Spot gold prices have recovered from Monday’s new low at $1,085 per ounce for the first time in five years and last traded at $1103.05/1104.2 per ounce from yesterday’s close.

Dollar index remained strong and continued its upside momentum to 98.06, up 0.04 from yesterday.

Greek banks restarted yesterday after three weeks of closure but capital controls and restrictions remain in place for withdrawals. It will started its repayment to international creditors today after a third bailout programme was approved.

Overnight, German PPI month-over-month in June was down 0.1 percent, below forecasts of a null change. EU current account in May was 18 billion, better than expectations of 23.1 billion.

Sentiment turned jittery after James Bullard, president of St. Louis Fed, commented that Fed’s rates hike was “more than a 50% probability right now” in an exclusive interview with FOX Business Network.

“On the subject of the first Fed hike, the Fed’s Bullard noted that while next week might be a little early for the Fed to raise rates, the probability of Fed lift-off in September is above 50%,” said ANZ. 

“The Fed is trying to be data-dependent in deciding when to tighten, but interest rates will probably rise if the economy stays on track for 3% growth in the second half,” it added.

In other metals, spot silver was last at $14.74/14.79 per ounce, up 0.11. Platinum was still trading below $1,000 per ounce, last at $970/980 rose $2. Palladium nudged down $1 to $603/608.

“Irrespective of whether weaker Chinese demand or the prospect of the Fed raising rates is the primary catalyst, what is becoming increasingly apparent is that commodity prices have been on the skids, with gold prices back to five year lows and oil prices down sharply since the start of the month,” ANZ noted.

Today, market awaits Japan’s monetary policy meeting, trade balance in Switzerland and UK’s public sector net borrowing. 

On the Shanghai Futures Exchange (SHFE), gold for December delivery were unchanged at 223 yuan per gram. 

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