Gold steady, opts for stability as extreme volatility subsides

Sun, 27 Apr - 11:59am

London 25/04/2014 – Spot gold held at little-changed levels in Europe on Friday – prices moved back into their well-established range, trading sideways and with much less volatility evident, traders said.

Business this morning was within a narrow range of some $5.00, with spot gold quoted at $1,294.30/1,295.15 per ounce, up $1.95 from the Thursday close.

In the previous session, gold was undermined by a sudden technical sell-off that took prices down to the lowest since mid-February at $1,268.50 before rising tensions in Ukraine triggered a vicious rally to near $1,300.

Ukrainian forces killed up to five pro-Russia separatists on Thursday, while Russia conducted army drills near the border, underlining fears that its troops would invade the region. US Secretary of State John Kerry said on Thursday that the US was getting nearer to imposing more economic sanctions on Russia.

“Gold continues to be wedged between its 100 DMA on the downside, $1,281, and the 200 DMA on the topside, $1,300, and we feel a daily close either side of these will be needed to confirm a breakout,” MKS said.

“The swift move back to the middle of this range indicates a lack of conviction by investors for bullion to materially weaken,” James Steel of HSBC said.

In other markets, the dollar was slipping slightly against the euro, trading around 1.3845, having tracked back from two-week highs set earlier this week.

With European inflation below 0.5 percent in March, fourth-quarter year-on-year GDP growth in the eurozone of just 0.2 percent and the EUR/USD up nearly seven percent over the past year, “the ECB is considering directly buying long-term securities which are backed by mortgages and auto loans, bank debt, corporate debt, and government bonds”, Sharps Pixley said

“While the euro may decline against the dollar, a step-up in actual inflation could lead to more demand for gold, which is a store of value,” it added.

Apart from the movement seen in Thursday afternoon, bullion has been ranged tightly for several sessions – the news flow from Ukraine ebbed and flowed amid a run of mixed economic releases.

Thursday’s action saw a big increase in futures market positioning, which points to speculative and technically oriented investors, Broker Commerzbank noted.

“On the other hand, the high volatility could deter physical buyers which would put short-term pressure on prices,” Commerzbank said.

Following a run of data-heavy sessions, the economic calendar is relatively light today, with the week’s final releases the US services PMI, and, more importantly, the UoM consumer sentiment index. Next week the main macroeconomic event is the US FOMC meeting, where further QE stimulus withdrawal is expected.

First-quarter GDP growth data also due next week is forecast at 1.1 percent but the recent upbeat numbers make a higher reading possible, lowering the appeal of safe-haven investments such as gold.

In other precious metals, spot silver was indicated at $19.55/19.60 per ounce, down 15 cents, but having recovered from the $19.94 low hit yesterday, which was the softest since end-December.

In the PGMs, the labour situation in South Africa remains in focus. Platinum producers plan to speak directly to striking South African miners regarding the latest pay offer after failing to agree with the labour union representatives.

Amplats, Implats and Lonmin held three-day talks with the AMCU union about the increased offer made on April 17 but these have not resulted in a deal so far.

Platinum, which fell as low as $1,387 yesterday, the lowest since February 12, was quoted at an unchanged $1,412/1,417 per ounce. Palladium was also unchanged at $801/807.

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