Gold continues to hold around $1,100/oz

Jan 25, 2016 - 3:01 AM GMT
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Despite a number of bearish developments last Friday, the gold price rose during Asian trading hours on Monday while continuing to trade around the $1,100 per ounce level.

Spot gold was last at $1,100.60-1,100.90 per ounce, up $2.90 from Friday’s close. Trading ranged at $1,097.80-1,101.10 so far.

Gold has more or less its held ground despite bearish developments last Friday whereby risk appetite improved after a crude oil price rally lifted global equities, while European Central Bank president Mario Draghi hinted of further policy easing in March.

Benchmark crude oil prices have rebounded to above $30 per barrel, however, they remain around 12-year lows due to high global production levels.

The Nymex WTI March contract was last at $32.27, up 0.25 percent, while the ICE Brent crude was 0.31 percent higher at $32.28 so far during Asian trading hours on Monday. Oil prices are getting support from a massive snowstorm on the US East Coast which helped boost demand for oil for heating.

“Gold’s ability to largely shrug off these developments is impressive,” said HSBC in a report on Friday.

Financial market volatility, including currency volatility, along with diminished expectations of a Fed rate hike in March and ongoing macroeconomic risks will keep a sufficient bid in gold to support prices, it said.

“Risk-on sentiment may be overly dependent on monetary authority decisions and may shift at short notice. This would support gold. Also, the risk-on rally may be predicated on further oil rallies, which may not materialize. This would also likely be supportive of gold. These possibilities may be lending indirect support to gold,” it added.

Market focus this week will be on the US Federal Open Market Committee’s meeting on January 26-27, whereby its statement due on Wednesday might reveal about policy intentions and the US economic outlook.

“Though no change in the fed funds rate target is [expected] given the language surrounding recent market events, global growth issues and domestic inflation expectations will all be of keen interest.  We suspect the Fed will not want to appear overly dovish in its statement for fears of adding to the prevailing market pessimism about the global economic outlook,” said National Australia Bank on Monday.

Majority of market participants now expect another rate hike only in June, according to the CME Group FedWatch – a tool to gauge the market’s view of an interest rate hike.

There are few major economic data releases on Monday, with just the German Ifo business climate, Italian retail sales, German Buba monthly report and Belgian BNN business climate of note later in the day.

In US data released last Friday, flash manufacturing PMI was 52.7, besting the forecasting of 51.5. Existing home sales totalled 5.45 million, while the CB Leading Index month-over-month stood at -0.2 percent.

In equities, the Shanghai Composite is up 0.61 percent to 2,934.361 on Monday morning.

In currencies, the US dollar index is down 0.13 percent to 99.40 so far on Monday.

In other precious metals, silver was rose $0.09 to $14.08/14.13 recently. Platinum increased $6 to $833/838, while palladium rose $3 to $495/$500.

On the Shanghai Futures Exchange, gold for June delivery was unchanged at 235.45 yuan per gram, while June silver was flat at 3,319 yuan per kilogram.