Gold sank for the third straight session in the US on Thursday morning, with risk-on sentiment boosting equities and leading to a dollar revival after the US currency had lingered at a six-month low.
Gold futures for June delivery on the Comex division of the New York Mercantile Exchange dipped $10.50 or 0.8 percent to $1,237.50 per ounce. Trade has ranged from $1,230.70 to $1,245.90.
The precious metal has pulled back since reaching a multi-week high at the beginning of the week, with a host of factors weighing on the entire complex. Notably, a rebounding dollar is providing significant headwind, last trading 0.1 percent stronger at $1.1266 against the euro.
“Gold remains under a liquidation watch as declining economic uncertainty is seen after favorable Chinese trade data and there has been building strength in the dollar and lastly there has been noted profit taking selling in a number of physical commodity markets this morning and that gives the bear camp the edge,” The Hightower Report said.
Markets were initially rattled at the beginning of the week after the International Monetary Fund (IMF) cuts its 2016 global growth forecast to 3.2 percent from 3.4 percent, but better-than-expected Chinese data improved overall sentiment and demonstrated that loose monetary policies were beginning to stabilise the economy.
Tomorrow’s Chinese first-quarter GDP growth and industrial production data is key for investors, especially after Beijing reaffirmed its 6.5-7 percent target at the beginning of the year.
Still, physical demand is lacking, particularly in India and China – the world’s two largest gold end-users. In India, a six week jewellers strike over an excise duty on gold imports suppressed demand, but gold dealers began to reopen their shops on Monday.
“Softness in the physical market can broadly be explained by seasonality and price elasticity of buyers and scrap sellers,” Joni Teves, a strategist at UBS, said. “However, there is some validity to concerns on the back of slower growth expectations and currency depreciation across emerging market economies where gold physical demand tends to come from.”
Paper holdings reversed after setting new yearly highs for five straight sessions, with ETF’s tracked by FastMarkets seeing net outflows of 3.24 tonnes to 1,810.
“While the current boost in risk-on sentiment could exert further selling pressure in gold, we believe that risk aversion will resume sooner rather than later, lifting ETF demand and speculative buying interest on Comex,” Boris Mikanikrezai, metals analyst at FastMarkets, said. “This could push gold to new 2016 highs in the next month or so, in our view.”
In US data, CPI month-over-month in March gained 0.1 percent, below the 0.2 percent forecast. Additionally, CORE CPI – excluding energy and food prices – over the same period experienced a 0.1 percent uptick, also missing the 0.2 percent estimate.
Unemployment claims between April 1-8 came in at 253,000, besting the economic consensus of 270,000 and importantly under the physiological 300,000 mark. Later today, natural gas storage figures are scheduled for release.
Turning to international markets, Germany’s DAX and France’s CAC-40 were last up 0.3 percent and 0.2 percent respectively.
As for other precious metals, Comex silver for May settlement fell 14.5 cents or 0.9 percent to $16.180 per ounce. Trade has ranged from $15.925 to $16.250.
Platinum for July delivery slipped $7.20 or 0.7 percent to $995.80 per ounce, while the most-actively traded palladium contract stood at $546.00 per ounce, up $3.50 or 0.7 percent.
(Editing by Tom Jennemann)
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