Gold drifts sideways despite stronger dollar and ETF outflows
LONDON (July 10) Spot gold was last up $5.90 at $1,254.90/1,255.90 per ounce, and some traders said it appears to be base-building following the sharp drops since April, which saw it fall to $1,180 per ounce, deep inside the production cost curve.
"Overall we would look for more range trading, but are aware that with the downward trends dominating, further down-legs cannot be ruled out," FastMarkets analyst William Adams said.
"Conversely, the likely presence of some large shorts means that if prices do start to move higher then short-covering rallies could be triggered. On balance we feel the metals still look oversold, so would favour the likelihood of further upside runs."
China’s trade data released early this morning has generally disappointed the market with imports falling 0.7 percent in June, compared with June 2012 and was down more than the 0.3 percent drop seen in May.
Exports also fell 3.1 percent in June, compared with June 2012, whereas May's exports had climbed one percent.
In the ETF sector, market sentiment remains firmly against gold, with outflows again accelerating, Commerzbank said.
Those tracked by FastMarkets have consistently trended lower of late, with contractions sometimes topping 10 tonnes.
"Even between mid-April and mid-May, less gold was withdrawn on an average daily basis than has been the case recently," Commerzbank's analysts said.
Gold also had to shrug off a strengthening dollar, which has seen consistent revaluation since the higher than expected non-farm payroll number on Friday.
Having pushed as high as 1.276 against the euro, the dollar was last at 1.281. In the previous session, the euro fell to its lowest price since April 4 at 1.275.
Looking at technicals, analysts at ANZ said topside resistance at $1,260 per ounce looked tough to penetrate, and that a rally through there could take out light stops. They pegged support at around $1,235 per ounce.
In wider markets, equities have generally drifted lower so far this morning. The FTSE 100 lost about two-fifths of a percent to 6,487 and the German Dax a third of a percent to 8,029.
In Asia, the Nikkei closed down 0.4 percent at 14,416, but the Hang Seng was up one percent at 20,904.
In the rest of the precious metals complex, trade has remained relatively uneventful, with silver unchanged at $19.22/19.27.
Platinum was last $6 higher at $1,365/1,375 per ounce and palladium wa up $5 at $698/704.
In the short-term, risks remain elevated on the PGM supply side, with wage negotiations, getting underway in the South African platinum belt.
