Gold edged higher on Monday as the dollar rally paused and European shares fell, but it remained near a three-month low after a US jobs report boosted expectations that the Federal Reserve would raise interest rates soon. Spot gold was up 0.2 percent at $1,169.10 an ounce by 1515 GMT. It fell 2.6 percent on Friday, its biggest daily loss since October 1, 2013, and reached its lowest since December 1 at $1,163.45 after the strong US non-farm payrolls report.
US gold for April delivery was up $3.60 an ounce at $1,167.70. "Data on Friday was so significantly higher than expectated that the market started to think that the Fed will have to start changing their language at the next meeting," Citi analyst David Wilson said. "But we'll have to wait for the next comments from (the Chair of the Federal Reserve, Janet) Yellen, because one data point is not necessarily what makes policy."
Data showed that US employers stepped up hiring in February and the jobless rate fell to its lowest since May 2008, sending Treasury yields higher. Higher interest rates could dent demand for assets that do not pay interest, such as gold. The dollar paused after hitting a 11-1/2 year high against a basket of leading currencies. Traders were also watching Monday's meeting of euro zone finance ministers, who were discussing Greece's reform programme.
Persistent uncertainty over the debt crisis, which could see Greece exit the euro zone, could boost retail demand for gold. "All the European issues haven't really gone away, Greece has not really gone away, so there are still risk issues out there that will limit downside moves," Wilson said. In a sign of waning investor interest, holdings in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell to their lowest in more than a month on Friday, while speculators cut net long positions in COMEX gold futures and options for a fifth straight week.
Demand for physical bullion in the main Asian markets after the price dip could provide some support, traders said. Premiums in the second-biggest gold consumer, China, largely traded between $5 and $6 on Monday, up from $4 to $5 in the previous session, signalling increased demand. Spot silver fell to its lowest in two months at $15.69 an ounce. Palladium was up 0.5 percent at $819.75 an ounce, while platinum fell to its lowest since mid-July 2009 at $1,145.95 an ounce.
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