Gold price trims losses as dollar gives up gains
New York (May 15) Spot gold swung into positive territory on Friday as the dollar gave up gains in the wake of a fresh batch of U.S. data. Gold futures, on the other hand, were modestly lower and on track for their biggest weekly gain since mid-January.
The dollar recovered from a three-month low against the euro as a recent spike in German Bund yields stalled, taking some wind out of gold's sails after a three-day rally took prices to their highest since mid-February at $1,227.04 on Thursday.
The dollar came off earlier highs to trade 0.2 percent lower against a basket of currencies.
Spot gold was up 0.1 percent at $1,223 an ounce, while U.S. gold futures for June delivery were down $3 an ounce at $1,223. Prices are up about 2.2 percent this week.
"Gold coming off today may be a bit of profit-taking on the move of the past couple of days ahead of data releases later, on the expectation that they could possibly be better than expected," Citi analyst David Wilson said.
"The weaker U.S. macro data over the past couple of weeks has pushed back expectations for an earlier rate hike, and now I think the market is increasingly thinking that if it's going to be this year, it will be the back end of the year."
Recent data has supported market expectations that the economy is not strong enough for the Fed to start raising record-low rates from June.
April industrial production slipped 0.3 percent after a revised 0.3 percent drop in March, the Federal Reserve said on Friday, marking its fifth straight monthly decline.
On the other hand, the Thomson Reuters/University of Michigan's preliminary May reading on the consumer sentiment index was 88.6, down from the previous month's reading of 95.9 and missed estimates of 96.
Gold is sensitive to rate expectations, as higher rates increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Investors remain cautious over the outlook for gold, which has fallen for the past two years and has struggled to maintain gains this year.
Holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 0.61 percent on Thursday to a four-month low of 723.91 tonnes.
Physical buying slowed in Asia as higher prices kept some consumers away. In China, premiums eased about 50 cents to $1 an ounce over the global benchmark on Friday, from premiums of $2-$3 earlier in the week.