Gold rose on Monday, clawing back some lost ground after recording its biggest one-day loss in two months in the previous session, as a slide in stock markets helped the metal rebound. Prices fell 1.2 percent on Friday after stronger-than-expected US payrolls data shored up expectations that a pick-up in inflation will spur further US interest rate hikes this year, boosting the dollar, in which gold is priced.
The US currency steadied on Monday, while stock markets were routed around the globe as resurgent US inflation raised the possibility central banks would tighten policy more aggressively than had been expected. Spot gold was at $1,335.72 an ounce at 1445 GMT, up 0.2 percent but well below late January's 17-month high of $1,366.07. US gold futures for April delivery were $1 an ounce higher at $1,338.30.
"It's undoubtedly the renewed weakness in stocks that we're seeing into the afternoon (that is driving gold)," Saxo Bank's head of commodity strategy, Ole Hansen, said. "The fact that, after an attempt to move higher, we're seeing stocks once again trading near the lows of the day is dictating moves elsewhere." "It seems gold is receiving safe-haven support."
US stocks opened sharply lower, extending the rout equity markets experienced on Friday on the back of rising bond yields and prospects for increasing inflation. While gold is often considered an inflation hedge, Julius Baer said in a note, the fact that price pressures were being driven by confidence about growth rather than dollar weakness and rising oil prices meant it was failing to react positively.
"'Good' inflation is a consequence of an improved growth backdrop, leading to an increase in wages that pushes up prices and services," it said. "As it should be accompanied by rising interest rates, the inflation uncertainty appears limited. Hence, gold's drop on Friday." Futures markets reacted after the jobs data by pricing in the risk of three, or even more, rate rises from the Federal Reserve this year.
Meanwhile, hedge funds and money managers raised their net long position in COMEX gold contracts in the week to January 30 to their highest level since late September, US Commodity Futures Trading Commission data showed on Friday. Spot silver was up 1.6 percent at $16.85 an ounce, having matched the previous session's five-week low of $16.54. The metal fell 3.7 percent on Friday in its biggest one-day decline since December 2016. Platinum was up 0.6 percent at $992.40 an ounce, while palladium, which alone among the major precious metals posted gains on Friday, was down 1.2 percent at $1,035.60.