Gold price recovers yesterday’s losses as markets eye US GDP data

on Nov 25, 2014
Listen, Tuesday, November 25: The price of gold has recovered yesterday’s losses so far in today’s trading session. Market participants will be eyeing economic data out of the US later today amid rising speculation on Sunday’s Swiss gold referendum.
Gold for immediate delivery had gained $3.50, or 0.29 percent, to $1,200.26 as of 11:47 GMT, and was trading 0.4 percent below its 50-day simple moving average of $1,205.56. On Friday, the precious metal hit a three-week high of $1,207.67 following news that the People’s Bank of China had cut interest rates for the first time in over two years to stimulate economic growth.
While prices have been relatively stable since the start of the week the preliminary US Q3 GDP report, due later today, may put prices under pressure should the figure come in better than expected. IG reports expectations that the second quarter-on-quarter estimate will be revised down to 3.3 percent from the 3.5 percent advance estimate.

Positive US economic indicators tend to boost the dollar and pressure gold prices. A stronger greenback tends to have a negative influence on bullion, as it makes dollar-denominated precious metals more expensive when converted to other currencies.
According to Fast Markets analyst Tom Moore, dollar strength still remains the dominant factor across markets, however, the decision by the Chinese central bank to cut interest rates has created an additional driver.
“The boost that this gave to the dollar reduced buying pressure in the precious metals but their upside potential remains – we will look for pushes higher to challenge their consolidation tops on any easing in the dollar’s strength,” Moore added.
In a note from yesterday, analysts at Commerzbank Commodity Research argued that the recent rally in precious metal prices was mostly due to “speculation,” meaning these “increases in the prices of gold and silver could find themselves on a shaky footing”.
On the COMEX in New York, gold for December delivery had gained $1.9, or about 0.14 percent, to $1,199.6 as of 12:14 GMT. Reuters quoted HSBC analyst James Steel as saying that the impact of a possible ‘yes’ vote at the upcoming ‘Save Our Swiss Gold’ referendum may quickly transfer into prices and push gold as much as $50 higher.
In his view:
“The bulk of opinion in the market appears to favour a ‘no’ vote and although a rejection of the provision by voters would not be [a] surprise, it could deal a modest psychological blow to the market and help reaffirm the bear trend in prices, but is unlikely to send prices immediately visibly lower.”
If passed, the initiative would force the Swiss National Bank to increase its gold holding to 20 percent of its official reserves, repatriate all of its gold and not sell any of its holdings. According to results from the most recent poll, only 38 percent of the Swiss population supported the upcoming gold referendum.

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