Gold closed marginally lower on Thursday as the dollar inched higher against a basket of currencies. However, losses were likely limited by tensions over Russia and a potential trade war. Solid U.S. economic news and increased demand for higher risk assets also helped cap the market.
Moscow has threatened to take retaliatory action after the United States and other Western countries expelled
June Comex Gold futures settled at $1327.30, down $2.70 or -0.20%.
The dollar was also underpinned by upbeat economic data on Thursday. Data showed U.S. consumer spending rose marginally for a second straight month in February as households boosted savings, the latest indication that the economy lost momentum in the first quarter. Consumer spending increased 0.2 percent last month after posting a similar gain in January.
Other economic fundamentals remained strong, however. For example, the number of Americans filing for unemployment benefits dropped to more than a 45-year low last week. The Core PCE Price Index showed moderation in monthly inflation readings after prices pushed higher in January. In February, personal income rose 0.4 percent and has now increased by the same margin for three straight months. The University of Michigan said consumer confidence ended March at its strongest level in more than 14 years even after slipping slightly compared to its mid-month preliminary report.
There was some negative news, the Chicago Purchasing Managers Index (PMI) unexpectedly fell to a one-year low in March.
Forecast
Gold managed to eke out a small gain during the first quarter of the year, mostly supported by the weaker U.S. Dollar and the volatility in the stock market. The easing of geopolitical concerns especially over North Korea and expectations of higher global interest rates may be keeping a lid on any rallies.
The close on December 29, 2017 was $1318.70. I think trader reaction to this level will determine the direction of the gold market during the second quarter. Gold has recovered from three attempts to take out this level – stopping at $1314.50 on February 8, $1309.30 on March 1 and $1312.40 on March 20.
Keep an eye on this level this quarter and probably the entire year. Trader reaction to $1318.70 will tell us if the buyers are still in control, or if the sellers are starting to take control.