Gold price little changed near $1640 as stock markets fall – watch the dollar

The price of an ounce of gold has been little changed over the last week, hovering near $1640 and is struggling for direction as traders and investors mull over falling stock markets on Monday, but the price of gold in the near term could be more inclined to track the US dollar movements.

Gold fell 1 percent last week, in tandem with equities and other commodities, as fear about Spain’s debt crisis raised concerns about global economic growth and dented risk appetite.

Investors largely ignored the HSBC Flash Purchasing Managers Index which showed that China’s factories stabilised in April as output ticked higher, new business rose from multi-month lows and export orders perked up.

Fed Meeting

All eyes are on the Federal Open Market Committee meeting on Tuesday and Wednesday, as the Fed’s attitude towards more monetary easing remains vital to gold’s fortunes. Bank of Japan will meet on Friday, and is expected to ease again.

“We probably won’t see much move before the Fed meeting, as people are sidelined and waiting for new cues from the Fed and Bank of Japan,” said Yuichi Ikemizu, head of commodity trading, Japan, at Standard Bank.

Spot gold moved in a range of $3 and traded nearly flat at $1,640.61 at 0655 GMT. US gold was little changed at $1,641.60.

Expectations of more money printing by the Fed pushed gold to nearly $1,800 in February, before a less dovish stance taken up by Fed officials sank bullion to about $1,611 in early April.

Gold prices have been stuck in a range between $1,610 and $1,680 since the beginning of April, facing headwinds from diminishing hopes of more easing from the Fed, while price sensitive physical buying lends support to the lower end of the range.

“There is still pressure for gold prices. The market has been trying to push the support level at $1,630-$1,640, although the push is rather half-hearted right now,” said Nick Trevethan, senior metals strategist at ANZ in Singapore.

Europe’s Problems Continue

Europe’s fiscal health also remains a concern. Spanish and Italian bond yields were still near dangerously high levels, while the prospect of a Socialist candidate winning the French presidential election added to worries whether the powerful Franco-German ally that has helped set tones in the region’s battle against its debt problems will remain intact.

Gold – Long Positions

Trading interest in gold remains sluggish as investors lack conviction in the direction of market. Money managers raised their net long positions in US gold futures and options in the week ended April 17 to 112,275 contracts, from 109,511 contracts a week earlier – its lowest in more than three years.

However the short term price of gold could largely be down to the value of the US dollar which is gaining against the euro on currency markets.

Worries about upcoming debt auctions in Italy and the Netherlands and concerns about a possible political backlash against austerity measures could keep the single currency in check in coming days, traders said.

Excerpt from: 
Gold price little changed near $1640 as stock markets fall – watch the dollar