The gold price dipped back below $1,200 on Monday morning when investors turned to the dollar, reflecting the divergence in monetary policy measures between the US, Europe and Asia.
Spot gold was last at $1,195.50/1,196.40 per ounce, down $5.20 on Friday’s close despite closing that day above $1,200.
Investors continue to trade the disparity between the Federal Reserve’s tightening of monetary policy and easing measures by other major central banks around the world.
Currently, the popularity of yield-bearing assets in the US appears to be dampening sentiment in gold while the timing of the Fed’s interest-rate rises is assessed. Against this backdrop, the People’s Bank of China made a surprise interest rate cut last week and there is pressure on on Europe to follow Japan into a fully-fledged money printing programme.
“Fresh catalysts are needed if gold is to continue its journey higher – economic data releases out of the US this week could potentially provide some guidance. In particular, the PCE Core Price Index and data on consumer inflation expectations contained in the University of Michigan November report due on Wednesday should have some influence on gold price action,” UBS’ Edel Tully said.
The data calendar today is extremely light, with only flash services PMI to come out of the US later this afternoon, while the rest of the week may help define gold movements, with preliminary GDP, consumer confidence, PCE price index, durable goods orders, home sales and unemployment claims data all to come out of the US.
The dollar remains strong against the euro this morning although punchy data out of Germany – the IFO business climate at 104.7 beat the forecast 103.2 – pushed it back to an effectively unchanged 1.2390.
In CFTC data, after three consecutive weeks of declines in gold positions, the latest data shows that net longs gained 2.52 million ounces to 7.44 million ounces.
“The recent move was on the back of longs re-establishing positions and shorts seeking cover. The bulk of the short-covering likely occurred on November 14 when gold prices climbed about $40 – the sharp move higher would have hit plenty of stops along the way,” Tully added.
In the other metals, silver has held onto almost all the gains made on gold’s surge above $1,200. It was last at $16.32/16.37 per ounce, down just seven cents.
“But the latest increases in the prices of gold and silver could find themselves on a shaky footing. Robust or reviving physical demand would be needed for them to prove lasting,” Commerzbank said in a note. “Though, as yet there is no reliable data to indicate such demand.”
Platinum at $1,218/1,223 per ounce was unchanged – it peaked earlier at $1,230 – and palladium at $785/791 was up $1.
“The PGMs still look oversold on a fundamental basis but they also have considerable overhead resistance to get through before they look better on the charts. The stronger dollar is also likely to act as a headwind,” FastMarkets analyst William Adams said.