A sharply lower dollar after a weaker-than-expected jobs report and preweekend buying drove US gold futures to a one-week high on Friday, but central bank gold sales could put a damper on the rally, traders said.
"Today might have been the day that the monthly unemployment number influenced gold. There is not too much else out there," said George Nickers at FC Stone in New York. Most-active gold for December delivery on the Comex division of the New York Mercantile Exchange settled up $7.80 at $684.40 an ounce, dealing between $676.20 and $685.10, which marked the loftiest level since July 26.
Nickers said that buying ahead of the weekend could be seen and that sellers were reluctant to leave positions after they saw the lacklustre July job growth figure. US employers boosted payrolls in July at the slowest pace since February, adding 92,000 jobs as the jobless rate ticked up to its highest since the start of the year, a government report showed.
The dollar fell broadly, in tandem with the US stock market, as surprisingly weak economic data exacerbated concerns about the US housing and credit sectors. Comex estimated final volume at just 83,005 lots, and gold options at 6,465. Turnover at Chicago Board of Trade's electronic 100-oz gold futures was 25,894 lots at 2:41 pm.
Jonathan Jossen, an independent trader, said from the Comex floor that there was some serious buying of call options this week, and that the precious metal market should move higher. "Traditionally, the first couple of days of the month are strong for gold," he said.
Jossen, however, said that central bank gold sales kept gold from rallying. He said that gold could test higher levels by the end of September, referring to the European Central Bank's (ECB) Central Bank Gold Agreement (CBGA).
The current CBGA agreement came into force in September 2004 and bound banks to cap total sales at 2,500 tonnes in the 2004 to 2009 period, compared with 2,000 tonnes in the previous five years. Analysts said that CBGA official gold sales were likely to hit the 500-tonne ceiling this year based on the rate of recent sales announced by the ECB.
Heavier-than-usual government sales of bullion already took a toll on bullion investor sentiment several times this year. Meanwhile, bullion held by streetcar's Gold Shares, the world's largest gold exchange-traded fund, steadied on Friday, a day after surging to a record high, signalling growing interest in the precious metal as a portfolio diversifier.
At 2:53 pm, spot gold was quoted at $674.10/674.90 an ounce, compared with $664.30/664.90 late on Thursday. The London afternoon gold fix was $670.50. Comex September silver jumped 16.3 cents, or 1.3 percent, to finish at $13.158 an ounce, trading between $12.985 and $13.200.
Spot silver was quoted at $13.10/13.15 an ounce, compared with $12.94/12.99 late on Thursday. London silver was fixed at $12.96. Nymex October platinum eased $1 to close at $1,298 an ounce. Spot platinum fetched $1,287/1,292 an ounce. September palladium closed up 75 cents at $367.05 an ounce. Spot palladium was quoted at $362/365 an ounce.