Gold dropped in late-afternoon trading on Tuesday after the release of better-than-expected US data and a recovery in equity markets and the dollar.
The spot gold price was last at $1,135.70/1,136 per ounce, down $15.90 on Monday’s close. Trade has ranged from $1,134.90 to $1,156.90. On Monday the metal peaked at its highest in seven weeks at $1,170.
In data, the US CB consumer confidence index at 101.5 beat the expected 92.8 and was up from the previous reading of 90.9. This might strengthen market expectations for an interest-rate rise from the Federal Reserve later this year.
“There are still several key US data points due to be released between now and the September FOMC meeting: GDP and PCE data this week and nonfarm payrolls next week would be the ones to watch. Given the latest shifts in sentiment and policy expectations, gold’s sensitivity to these data releases is likely to become even more pronounced,” UBS said.
The CME Group FedWatch – a tool used to gauge market expectations of a Fed Funds rate adjustment – currently predicts a 21-percent probability of a rate rise in September.
In other US data today, new home sales at 507,000 were lower than the forecast 512,000 but up from the previous reading of 482,000. But the Richmond manufacturing index at 0 missed the expected reading of 9.
The S&P/CS Composite-20 HPI was up 5.0 percent, close to the forecast of 5.1 percent, while the HPI at 0.2 percent was below the estimate of 0.4 percent. The flash services PMI at 55.2 was better than forecast but down from the previous reading of 55.7.
The dollar is stronger today – the dollar index was last at 94.62.
Meanwhile, European and US equity markets rebounded after China’s central bank had made further monetary easing measures to stabilise falling markets – the Shanghai composite index tumbled more than seven percent today.
The country’s central bank cut its benchmark lending rate by 25 basis points to 4.6 percent – the fifth reduction since November – with effect from Wednesday. As well, it lowered the one-year deposit rate by 25 basis points to 1.75 percent.
“Gold will retreat towards the $1,135/40 area initially,” ICBC Standard Bank analyst Tom Kendall said. “That has been reinforced by the 50bp cut in Chinese bank reserve requirements announced this morning.”
“That cut will do little to move the structural dynamics of the economy but will help commercial banks to manage the squeeze on short-term liquidity, and may underpin investor confidence somewhat,” he added.
In the other precious metals, silver was last at $14.64/14.69 per ounce, down 15 cents. Platinum at $973/978 was $9 lower and palladium at $533/538 was down $33 and around its lowest since September 2010.
(Editing by Mark Shaw)
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