Gold price firmer on QE hopes, PGMs rally on rising US car sales

Gold was higher for the first time in a week on Tuesday morning on positive noises about further quantitative easing (QE) from the US.

Spot gold has so far gained $6.60 to $1,581.65/1,582.45 per ounce after another member of the US Federal Open Market Committee, vice chairwoman Janet Yellen, came out in support of continued QE.

“I see the currently available evidence as suggesting that our asset purchases have been reasonably efficacious in stimulating spending,” Yellen said in an address at the National Association for Business Economics (NABE). “There is considerable evidence that these purchases have eased financial conditions, and so have presumably increased interest-sensitive spending.”

The Fed is currently committed to purchasing mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month (QE) in an open-ended programme.

Since the central bank tied the duration of this programme to the health of the US jobs market, the release of the February US unemployment rate and the change in non-farm employment will be closely watched on Friday.

The market will also eye a statement from the European Central Bank on Thursday for signs of the strength of the world economy and potentially for further easing from the Bank of England.

Today, the data front is fairly busy. Spanish services PMI data for February disappointed at 44.7, while the Italian number came in as expected at 43.6. The Europe-wide number surprised with a reading of 47.9, beating the forecast and the previous 47.3.

Retail sales growth for the same month also outperformed at 1.2 percent, above the predicted 0.3 percent.

Other releases scheduled for Tuesday include the February US ISM Non-Manufacturing PMI and the March US IBD/TIPP Economic Optimism index.

In company news, the merger of Glencore and Xstrata will go ahead on April 16. The completion data has already been deferred twice due to regulatory processes.

Equity markets have a bit of spring in their step, with all major indices in positive territory – the FTSE 100 is up 0.7 percent and the DAX 1.6 percent at 7,817. In Asia, the Hang Seng is 0.1 percent higher at 22,560 and the Nikkei gained 0.2 percent to 11,683.

The euro is slightly firmer at 1.304 against the dollar while the dollar index is down 0.09 at 82.03

On the LME, three-month copper added $43 or 0.5 percent to $7,768 per tonne while in energy markets Brent crude oil recovered 76 cents to $110.70 per barrel.

VEHICLE DEMAND LEADS PGMS HIGHER

The rest of the precious metals complex echoed gold’s solid performance, with gains of more than one percent across the board.

Silver was last up 29 cents at $28.88/28.93 per ounce, platinum is up $23 at $1,592/1,597 and palladium gained $10 to $724/730.

“Platinum and palladium are recovering somewhat this morning from the losses they have suffered in recent days,” Commerzbank said, attributing it to an uptick in vehicle sales.

In the US, the upswing in vehicle sales continued in February to 1.19 million cars and light trucks, up 3.7 percent on the previous year.

“Palladium in particular should profit from the robust sales in the gasoline-dominated US vehicles market, as it is used in the production of autocatalysts for gasoline engines,” Commerzbank added.

(Additional reporting by Kathleen Retourne, editing by Mark Shaw)

Martin Hayes

About Martin Hayes

Martin has spent over 30 years reporting on the LME, both at Reuters and, since 2006, with FastMarkets, where he heads up the global editorial team and continues his passion for Minor Metals.