Gold sideways to lower in narrow range, central bank meetings eyed

London 06/03/2013 – Gold moved sideways to lower in early European trading on Wednesday as the market awaited key indicators on global monetary stimulus from Thursday onwards.

The metal was last at $1,574.40/1,575.20 per ounce, down $2.55 on the close and sticking within its narrow range, despite a sharp rally in equities which saw the Dow Jones Industrial Index lift to an all-time high.

So far this week the metal has fluctuated in a range of just $15 and it will need a powerful catalyst to move it out of its bounds, UBS analyst Joni Teves said.

A potential driver may emerge from the plethora of central bank meetings on Thursday, starting with the Bank of Japan, which is widely expected to announce further monetary stimulus. This will be followed by statements from the European Central Bank – who are expected to keep their benchmark rate at a low of 0.75 percent – and the Bank of England – who may also announce further stimulus.

In other central bank news, South Korea announced that it has purchased 20 tonnes of gold in February, adding to the 30 tonnes it bought in 2012.

“This comes as a confirmation to market chatter of potential official sector activity over the last few weeks, especially during the move below $1,600,” UBS’ Teves said.

But the main event of the week is likely to come on Friday’s when the February US non-farm payroll numbers are expected to show 158,000 jobs were added. The corresponding unemployment figure is forecast at a steady 7.9 percent. A large deviation from these numbers could impact on market expectations for the longevity of the Fed’s easing programme.

Today, the market gets a preview of this data, with payroll firm ADP releasing its non-farm numbers at 13:15 GMT.

“We’ll be watching for signs of adverse weather effects in the ADP data, and for any revisions to the remarkably strong capital goods orders figures for January in the factory orders report,” Wrightson ICAP said in a note.

January US factory orders are expected to show a decline of 2.2 percent, following an increase of 1.8 percent in December.

In wider markets, European and Asian equities are still echoing the strong US performance yesterday. The Nikkei is up two percent at 11,932 and the Hang Sang gained nearly one percent to 22,768, while the FTSE added a third of a percent to 6,453.

Currencies have the euro slightly lower, losing a fifth of a cent to $1.302, while the dollar index ticked up to 82.2. In energy markets, Brent crude oil is down 60 cents at $111.29 per barrel.

OTHERS FOLLOW GOLD

The rest of the precious metals complex followed gold lower, with silver slipping nine cents to $28.64/28.69 per ounce.

The platinum group metals also came off the previous session’s strong performance, which had been underpinned by strong US car numbers. Platinum was last down $6 at $1,584/1,594 per ounce and palladium drifted $2 lower to $733/738 per ounce.

“We are neutral on palladium while it continues to trade in a small pennant formation and down-channel,” FastMarkets analyst Jono Remington-Hobbs said.

“If the metal was able to sustain a break back above these levels we would look to turn positive and cite $652-$666 as our targets.”

(Editing by Martin Hayes)