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Swinging Gold Prices due to Greece Uncertainty and U.S. Data Strength

After falling 3.43% last week, the U.S. Comex gold futures dropped a further 0.19% this week to $1,232.20 on Tuesday. The Dollar Index is almost unchanged for the week and ended at 94.758 on Tuesday. Year-to-date, the gold futures have risen 4.06% while the Dollar Index has also surged 4.97%. This week, the S&P 500 Index climbed 0.65% while the Euro Stoxx 50 Index and the crude oil futures fell 0.44% and 3.23% respectively. The ten-year U.S. Treasury bond yield rose 4bp to 1.998% while the ten-year German Bund yield was almost unchanged at 0.369%. The Euro/Dollar was flat so far this week.

Macro Events Dominate the Play
The January U.S. non-farm payrolls rose 257,000 compared to 228,000 estimated and 329,000 in the prior month while the unemployment rate climbed 0.1% to 5.7% in January. The December job openings unexpectedly increased to 5.03 million, the highest level since January 2001, signifying the rising momentum in the U.S. job market. In China, the January inflation was 0.8% compared to an expected one percent, calling for more monetary easing as the credit conditions become tighter when inflation declines. In Europe, Greece and its creditors are heading to a clash on Wednesday, and more and more analysts are putting a 50% probability of a Greek exit from the Euro.

Near-term Impact on Gold Prices
A potential hike of the U.S. interest rates on the back of stronger job numbers has weighed on the gold price sentiment. At the same time, continued liquidity pumping by the ECB, China, Japan, and Australia as well as the growth of the gold-backed ETP positions are providing a floor to the gold prices. Leading up to the Chinese Lunar New Year on 19 February, the Shanghai Gold Exchange’s volume rose to a two-month high. In India, an expected cut in gold import duty and the festival-related buying can help to bump up gold demand towards the end of this quarter. The managed gold net combined positions fell 3.4% during the week ending 3 February, indicating a small reduction in speculative positions.

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11 Feb 2015 | Categories: Gold

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