Gold prices stagnant despite physical buying interest

Precious metals continued to hold in well-worn ranges in European trading on Tuesday morning, with little change in prices once more.

Gold has been under pressure from concerns that the US Federal Reserve would begin to tighten monetary policy while the country’s unemployment rate continues to decline – it has fallen to 7.7 percent, according to data released on Friday – but price dips have attracted interest from physical buyers and prevented the market from falling further.

Spot metal was last at $1,582.65/1,583.45 per ounce, a $2.75 loss – today marks the eighth consecutive session of fluctuating in a narrow range between $1,586.75 and $1,561.45.

“The short term technical outlook is neutral while gold remain range-bound but the bias remains lower,” ANZ Capital Markets said in a note.

In other precious metals, silver at $28.92/28.97 per ounce was up five cents. Palladium, which had been enjoying a strong run from the previous Tuesday based on improved growth in the automotive sector, was last indicated at $769/775, a $3 increase, while platinum at $1,591/1,596 was down $8.

“Platinum, and above all palladium, were among the best-performing commodities in recent weeks and were largely able to buck the downward trend on the commodities markets,” Commerzbank said in a note.

“At a good $770 per troy ounce, palladium is even trading at close to its highest level for one-and-a-half years, while platinum is attempting to take the $1,600 per troy ounce hurdle again,” it added. “Both of these precious metals are finding support from robust car sales.”

During the first two months of 2013, car sales in China totalled 2.84 million units, an increase of 19.5 percent on the total for the same two months of last year, according to figures from the China Association of Automobile Manufacturers.

In currency markets, the euro was last at 1.3009 against the dollar. Industrial commodities are stuck in consolidation mode, with three-month copper last at $7,729 per tonne on the LME, down $26.

A rally in equities has driven investors out of commodities, pushing the equities-to-commodities ratio to its highest in four years.

“To pessimists the combination of subdued macro data and strong equity confidence implies that we may have entered a new phase of ‘irrational exuberance’. But other, admittedly softer, indicators suggest this is some way off: Media ‘hype’ is remarkably absent, with commentaries more focused on a coming correction than the next big move up,” Credit Suisse said.

“Meanwhile, most investors seem to be watching markets in disbelief rather than joining in the ‘frenzy’,”, it added.

Looking ahead, there is little on the horizon to move markets before Thursday’s US weekly unemployment figures and Friday’s CPI and UoM sentiment indicators.

(Additional reporting by Gregory Holt, editing by Mark Shaw)

Perrine Faye

About Perrine Faye

Perrine started reporting on commodities (oil and gold mainly) in 2002 for Agence France Presse. She switched to base metals in early 2007 when she joined FastMarkets, and has since 2009 led the coverage of the physical market, pricing premiums for primary and secondary metals.