Gold: the Fed setting the pace

At lows not seen since mid-January, bullion prices briefly slipped below USD 1,200 earlier on Monday. In fact, little changed in anaemic trading since earlier last week. And as US home sales data proved later in the session (at nine month lows), gold prices remain fairly sensitive to macro numbers form across the pond. The market then recovered back above USD 1,200 in thin volume trading.

Chinese players are still absent amid public holidays and there is little scope for any physical support here. Investor appetite also remains weak, despite small builds in global ETF positions at the end of last week.

Instead, the market will be eying Janet Yellen’s testimony to the US Congress when she starts delivering the Fed’s semi-annual take on the monetary policy later on Tuesday. 

It is likely the market will continue in dull trading against the greenback unless Yellen surprises and interest rate hike expectations change dramatically (currently the FX market is expecting a June increase). Yellen’s speech will be most interesting for her take on inflation. The headline CPI is likely to remain below the Fed’s 2% target in the near future. It questions the need to hike rates should price pressures remain tamed even as the labour market continues to improve.

Otherwise, there is little else to gold trading at the moment. It seem Greek headlines provided hardly any support to safe haven flows lately, just as suspected earlier. At the same time, the troika bailout extension deal could well take it off the radar for now. Naturally, this is still pending on Athens’s response with its proposed list of reforms earlier this week.

As for spot bullion prices, the key support remains at USD 1,180/oz with resistance back near USD 1,240/oz.