Gold managed to claw back some its losses yesterday

After suffering the previous few days, gold managed to claw back some its losses yesterday. This was despite the more optimistic outlook for the US economy portrayed in the release of manufacturing (Empire Manufacturing and Philadelphia Fed) and jobless claims numbers. The dollar eased off as sentiment turned mildly risk on, which also reduced downward pressure on gold.

During Asian market trading hours, the upward momentum stalled as interest in gold was not forthcoming. Activity remained relative subdued throughout the session which kept prices on an even keel. This morning however gold has run into some headwinds, taking the rest of the complex lower as well, as India’s Finance Minster announced an upward revision of the customs duty on gold imports. The duty on gold bars and coins will be doubled (to 4%), and the excise duty on refined gold will become 3%. While the initial announcement has raised concerns over a drop in demand for gold, we would await the release of the final details before drawing any overly bearish conclusions.

US inflation excluding food and energy has surprised on the downside, rising 0.1% m/m in February (against expectations of 0.2% m/m). We do believe the market will read this as a positive for precious metals keeping hopes alive of any further easing of US monetary policy. Gold support is at $1,638 and $1,621. Resistance is $1,670 and $1,684.