Gold price stuck around 1-mth lows, PGMs face headwinds

Nov 3, 2015 - 10:18 AM GMT
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The gold price remained under pressure on Tuesday morning in London amid thin trading conditions while Japan is absent for a national holiday and ahead of a possible rise in US interest rates before the end of the year.

Spot gold was last at $1,133.20/1,133.50 per ounce, barely changed from Monday’s close and around one-month lows. As well, silver at $15.36/15.41 was little changed.

“Despite gold slipping $50 from last month’s highs we have yet to see much interested buying supporting the price and ETF support has been muted,” Triland noted.

The precious metals complex has struggled since the Federal Reserve released a hawkish statement in October – many investors believe the US central bank will lift rates at its December meeting. According to CME Group FedWatch, the probability of a rate rise in December is now 48 percent.

Major data releases from the US between now and that meeting are now seen as crucial in determining if a lift-off is justified in December; Friday’s blockbuster jobs report is one such event – the US is seen adding 179,000 non-farm jobs in October, up from 142,000 in September.

Monetary tightening is negative for gold investment – rising interest rates will boost the attractiveness of dollar-based instruments. The dollar was last at 1.0992 against the euro, around a quarter of a cent stronger and not far from multi-week highs.

“The combination of a stronger dollar, soaring US equity markets, ETF liquidation (especially in palladium and platinum), a jittery Fed, along with a worsening technical picture will all combine to keep the complex on the defensive for little while longer,” INTL FCStone analyst Edward Meir said.

Indeed, several participants have said that the PGMS face increasing headwinds. Platinum was unchanged at $970/975 per ounce while palladium at $643/648 was $2 higher.

Platinum-backed ETFs have seen drawdowns of about 160,000 ounces so far in October, taking overall holdings to their lowest since early 2014, while palladium ETFs have seen outflows of 207,000 ounces this month.

“We could see more selling in both complexes in the days ahead, as dreary manufacturing data out of China (and the US) should continue to weigh on metals-related sectors,” Meir added.

In data, the Spanish unemployment change undershot at 82,300. Later the US will release its factory orders and total vehicle sales. As well, ECB president Mario Draghi is set to speak this evening.

(Additional reporting by Vivian Teo and Dalton Barker, editing by Mark Shaw)