Gold Prices Unable to Break Trading Range Before Yellen Speech

 

EDGWARE (Scrap Monster):Gold prices lost $12 per ounce on the day in London trade on Friday midday following the release of April's US consumer price index showed 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 Euro currency lost further ground against the US Dollar, falling to $1.10450 per Euro, a 5-week low.

 

Excluding food and energy, the US Bureau of Labour Statistics’ latest core Consumer Price Index (CPI) jumped 0.3% in April from March, the biggest month-on-month hike since early 2013.

 

"[This] should help Federal Reserve policy makers gain confidence inflation will move toward their 2% goal as they consider their first interest-rate rise since 2006," reports Bloomberg.

 

On the week, gold was down 1.8% against the Dollar, unable to break its trading range for US investors to stand just above $1202 per ounce.

 

"Decent Chinese buying was apparent yesterday," says Swiss refinery and finance group MKS in a daily note, "forcing spot gold to test up towards $1213 on several occasions."

 

But with gold trading 2.5% either side of $1200 over 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 adds that the break of the range was "elusive", putting prices "back to square one."

 

Gold prices for Eurozone investors, in contrast, rose to a 3-week peak at €1091.65 early Friday afternoon, offering a weekly gain of 2.1% per ounce.

 

More volatility was expected by the close of the day before the long US and UK bank holiday weekend, as Friday sees a number of speeches by central bankers, the most anticipated 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, Latvia. 

 

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 €7.2b in remaining aid. 

 

"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. 

 

Germany’s Commerzbank recently put the probability of a Grexit at 50%.

 

The Eurozone’s largest economy, Germany saw the business climate drop in May for the first time in seven months, signalling caution over the further economic outlook.

 

After saying that the Eurozone was looking "brighter today than it has for seven long years," ECB president Mario Draghi insisted on the need for structural reforms to increase long-term growth during his Friday morning speech in Portugal.

 

After Wednesday's dovish minutes from the US Federal Reserve, Janet Yellen's speech later today "might be interesting, but really the Fed is in waiting mode," reckons Alvin Tan from French investment bank Societe Generale, who believes rate hikes will 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, holding above the $17 level.

 

Pointing to the fact that silver was also unable to break the topside, however, "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.

 

Both the New York and London markets will be closed on Monday.

 

Courtesy: www.bullionvault.com