GOLD PRICES lost $12 per ounce on the day in London trade on Friday midday following the release of the April CPI showing the biggest US inflation jump in two years, amid a busy week of economic indicator releases and speeches by central-bankers.
US and European stock markets dropped and so did Brent crude oil contracts. The European currency was still losing ground against the USD with USD1.10450 per Euro, a low unseen since mid-March.
An important indicator for the US inflation released on Friday, The US Bureau of Labour Statistics’ latest core Consumer Price Index (CPI) (excluding food and energy) jumped 0.3 percent in April, showing the biggest hike since early 2013.
This raise “should help Federal Reserve policy makers gain confidence inflation will move toward their 2 percent goal as they consider their first interest-rate rise since 2006,” said Bloomberg.
On the week, gold was down by 1.8%, unable to break its trading range for US investors, just above $1202 per ounce at 2pm.
After an overnight subdued trading in Asia, Gold was still range-bound in London. “Decent Chinese buying was apparent yesterday forcing spot gold to test up towards $1213 on several occasions,” wrote Swiss refinery and finance group MKS in a daily note.
Asian investors seemed not to be focussed on precious metals. “The Chinese [were] hooked on surging equities while demand in India stayed weak and was unlikely to pick up as the wedding season cools,” revealed Reuters.
Highlighting how gold had been trading 2.5% either side of $1200 in the last two months, “the current range-bound nature of the market,” wrote Ole Hansen, Head of Commodity Strategy at Saxo Bank in a note, “is also a clear indication of how the yellow metal currently need a clear driver and it has left the market very split on where we go from here.”
Hansen deplored that the break of the range was “elusive” as prices were “back to square one.”
Gold prices for Eurozone investors rose to a 3-week peak to €1091.65 Friday early afternoon, offering a weekly rise of 2.1% per ounce.
More volatility was expected by the close of the day before the long US and UK bank holiday weekend. Friday sees a number of speeches by central bankers, the most anticipated one being US Fed president Janet Yellen’s at 5pm (BST).
In the meantime, Greek Prime Minister Alexis Tsipras sat with French President Francois Hollande and German Chancellor Angela Merkel for another round of talks during the EU summit in Riga.
“We think conditions have matured to progress further in the next 10 days, in May, for the deal to be sealed,” said a Greece spokesperson Friday, confirming that Athens was seeking to settle all their payments due in June.
But not all experts shared this optimism. Germany’s Commerzbank saw the probability of a Grexit at 50%. After battling a crisis for 5 years, the Greek government also held talks with the EU and the IMF over a cash-for-reform deal that could release up to EUR 7.2b in remaining aid.
In the Eurozone’s largest economy Germany, the business climate index dropped in May for the first time in seven months to 108.5, from 108.6 in April, signalling caution over the further economic outlook.
After saying that the Eurozone was looking “brighter today than it has for seven long years,” ECB’s president Draghi insisted during his Friday morning speech in Portugal on the need for structural reforms to increase long-term growth.
After the disappointing minutes on Wednesday, investors were waiting for Janet Yellen’s speech Friday afternoon to find more clues regarding the interest rate raise. Yellen was expected to mention the static performance of the US economy during the first months of the year.
"The speech later today might be interesting, but really the Fed is in waiting mode,” said Alvin Tan from French investment bank Societe Generale, who believed that rate hikes were to be seen in September and that the decision was likely to be made in the next month or two.
Silver prices broadly followed gold’s volatility this week failing to hold any break downside of the $17 level so far.
Pointing to the fact that silver was unable to break the topside either, “silver prices will remain range-bound over the next couple of weeks, but a downside correction is most likely to follow,” said head of global technical strategy MacNeil Curry at Bank of America Merrill Lynch yesterday on CNBC.
On the investment side, the giant gold ETF SPDR Gold Trust (NYSEArca:GLD) is expected to close the week 8.65 tonnes lighter slipping to its lowest level in four months.
The New York and London markets will be closed on Monday.
