Gold Settles Above $1,200 On Weak Dollar And Soft Data

April 15, 2015

New York (Apr 15)  Gold futures snapped a two-day loss to end higher on Wednesday, as the dollar trended lower against a band of select currencies following some soft economic data from the U.S., even as uncertainty prevailed among investors over the Federal Reserve's next move on plans to hike rates.

The Fed is assessing a murky mix of incoming economic data, leaving many to question as to when the central bank will likely hike interest rates.

Meanwhile, the European Central Bank, as expected, left official interest rates unchanged Wednesday. The bank's refi rate remains at 0.05%.

The European Central Bank's chief Mario Draghi in his customary post-decision press conference in Frankfurt Wednesday observed the massive asset purchase program as proceeding smoothly and having an impact on economic activity, which is expected to gradually strengthen in the months ahead.

Investors also weighed some weak economic data from the U.S. with industrial production dropping more than expected in March, partly reflecting a sharp pullback in utilities output. Meanwhile, manufacturing activity in New York unexpectedly contracted in April, due partly to continued decline in new orders.

Gold for June delivery, the most actively traded contract, gained $8.70 or 0.7 percent to settle at $1,201.30 an ounce, on the Comex division of the New York Mercantile Exchange on Wednesday.

Gold for June delivery scaled an intraday high of $1,202.90 and a low of $1,188.30 an ounce.

On Tuesday, gold futures dropped $6.70, or 0.6 percent, to close at $1,192.60 an ounce, with investors continuing to mull over the U.S. Federal Reserve's timing of an interest rate hike.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, moved up to 736.08 tons, from its previous close of 734.29 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 98.37 on Wednesday, down from its previous close of 98.78 on Tuesday in late North American trade. The dollar scaled a high of 99.36 intraday and a low of 98.25.

The euro trended higher against the dollar at $1.0688 on Wednesday, as compared to its previous close of $1.0656 in North American trade late Tuesday. The euro scaled a high of $1.0698 intraday and a low of $1.0572.

On the economic front, a Federal Reserve report on Wednesday showed U.S. industrial production to have dropped more than expected in March. The Fed said industrial production fell 0.6 percent in March after inching up 0.1 percent in February. Economists expected production to drop by 0.3 percent.

Manufacturing activity in New York unexpectedly contracted in April, a report from the Federal Reserve Bank of New York showed Wednesday. The New York Fed's general business conditions index dropped to a negative 1.2 in April from a positive 6.9 in March, with a negative reading indicating a contraction in regional manufacturing activity.

The index turned negative for the first time since last December, surprising economists, who had expected the index to inch up to 7.0.

A report from the National Association of Home Builders on Wednesday showed homebuilder confidence rebounded rebounded more than expected in April, after a notable deterioration in U.S. homebuilder confidence in the previous month. The NAHB/Wells Fargo Housing Market Index jumped to 56 in April from a downwardly revised 52 in March. Economists expected the index to climb to 55 from a reading of 53 originally reported for the previous month.

China's gross domestic product expanded 7.0 percent on year in the first quarter of 2015, the National Bureau of Statistics said on Wednesday, coming in at 14,066.7 billion yuan. The headline figure was in line with expectations while slowing from 7.3 percent in the previous three months.

Eurozone merchandise trade surplus for February increased from last year, although weaker than expected, data from the Eurostat showed Wednesday. The euro area recorded an unadjusted trade surplus of EUR 20.3 billion in February, up from EUR 14.4 billion in the same month last year. Economists were looking for a surplus of EUR 21.0 billion.

Germany's consumer prices increased for the second straight month in March as initially estimated, final data from the statistical office Destatis showed Wednesday. Consumer prices rose 0.3 percent in March from last year, following a 0.1 percent increase in February. The annual increase matched the preliminary estimate published on March 30.

French consumer prices declined for the third straight month in March, data from the statistical office Insee showed Wednesday. Consumer prices fell 0.1 percent year-on-year in March, slower than February's 0.3 percent decrease. This was the third consecutive fall. Economists had forecast prices to remain flat in March.


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