Gold Threads Water On Stronger US Dollar

New York (Jan 15) Gold prices are treading water Wednesday, pressured by a stronger U.S. dollar, as U.S. data suggest some economic strength, analysts said.

By mid-day EST, spot gold was flat at $1239.

The strength in the U.S. dollar started Tuesday after generally better-than-expected retail sales figures, and continued into Wednesday as the U.S. producer price index was in line with the consensus view and Empire State manufacturing survey was stronger than expected.

Several market watchers said given the string of firmer economic reports, there are growing views that perhaps Friday’s dismal U.S. nonfarm payrolls report was an aberration. Barclays said not only was retail sales data stronger, but business inventories showed strength and there was a recovery in small business sentiment.

“The weak U.S. employment report from last week looks to have been a blip,” Barclays said.

Analysts at Brown Brothers Harriman concurred, adding that “the strength of the retail sales stripped of autos, building materials and gasoline showed an unexpected resilience of the U.S. consumer that does not mesh with the weakness in employment figures.”

What that’s done is to lift the U.S. dollar, BBH said, “as investors continue to regain confidence that the FOMC  (Federal Open Market Committee) will proceed with its (quantitative easing) tapering efforts.”

Edward Meir, commodities consultant at INTL FCStone, said considering the latest round of data, market watchers are “taking all the U.S. December figures with a grain of salt as the poor weather undoubtedly played havoc with the numbers, including last Friday’s December nonfarm payroll number that came in at 75,000, well below the 198,000 forecast.”