Gold price lifts despite firmer US dollar
London (Apr 21) Precious metals held onto small price gains on Tuesday morning in Europe, reversing some of the previous day's losses, despite a strengthening of the US dollar.
A firmer US currency makes precious metals more expensive, which often deters overseas buyers. The price of gold continued to trade in a narrow range with little to push it above the key level of $US1,200.
Spot gold was up 0.44 per cent at $US1,201.91 a troy ounce in morning European trade.
Analysts see little scope for the metals to make any major breakouts, unless there's a change of tone in broader financial markets.
"We remain more bullish for the [platinum group metals] than for bullion, but gold could well spring into action should equities get jitterier, or the situation in Greece deteriorates," said William Adams, head of research at FastMarkets.
He said precious metals have run into resistance whenever they advance, with silver looking the weakest of the bunch. The gold price is settling in the lower ranges of late, as is platinum, while palladium is holding up relatively well, he said.
UBS said that after a volatile first quarter, "gold appears to be taking a break for now," with trading confined to a narrow range of about $US25 in the last few weeks. "The reality is that there are hardly any catalysts out there to encourage gold to break out in either direction," it said.
The one big issue on the horizon is the likely first interest rate rise by the US Federal Reserve, which could put investors off buying gold. A Fed that's battling inflation isn't positive for the yellow metal, often seen as a hedge against inflation. While that's a well-known threat, said UBS, "overall uncertainty on the timing and pace of Fed tightening" adds to investors' reluctance to make any decisive bets.
Russia's central bank reported that its gold reserve increased by nearly 3 per cent in April, reaching 39.8 million troy ounces. The Central Bank said it purchased 1 million ounces of gold from national producers in March -- which Commerzbank said was the largest amount bought since September.
The Russian currency weakened sharply at the beginning of the year, and the central bank made no purchases in January and February. Moreover, the central bank sold foreign currency reserves to shore up the ruble. Now that the tide has turned, the central bank is back in the market.
"Because the ruble has appreciated significantly again in the meantime and the local gold price has fallen accordingly, the Russian central bank has presumably decided to resume its gold purchases," said Commerzbank.
All the other precious metals were higher on Tuesday. Spot silver was up 0.7 per cent at $US16.000 an ounce, spot platinum was up 0.6 per cent at $US1,155.40 an ounce, and spot palladium was up 0.4 per cent at $US775.40 an ounce.
Source: BusinessSpectator.au
