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Gold Inches Up On Softer Dollar; All Eyes On US Jobs Report
Twenty four karat gold bars are seen at the United States West Point Mint facility in West Point, New York, June 5, 2013. PHOTO BY REUTERS/Shannon Stapleton
By A. Ananthalakshmi
10/01/2014
SINGAPORE (Reuters) - Gold edged higher on Friday as the dollar came off seven-week highs, but investors were looking ahead to United States nonfarm payroll numbers to gauge the strength of the U.S. economic recovery and the outlook for the Federal Reserve's monetary policy.
Markets fear a strong jobs report could prompt the Fed to further reduce its bond-buying stimulus. The U.S. central bank last month announced a $10 billion cut to its $85 billion in monthly asset purchases.
Gold lost nearly 30 percent of its value last year as investors anticipating a stimulus cut shifted money to equities.
"We are seeing some position-squaring ahead of the nonfarm payrolls report, which really is the main driver for gold right now," said one Hong Kong-based precious metals trader.
"The Fed has been looking a lot at employment data to take decisions on the stimulus."
Other economic data earlier this week, including weekly jobless claims, has already suggested that the U.S. economy is gaining steam.
Spot gold rose 0.5 percent to $1,233.90 an ounce by 0342 GMT. The dollar eased from its seven-week high as investors booked profits ahead of the U.S. jobs report.
A weaker greenback makes dollar-denominated gold less expensive for holders of other currencies.
Gold had gained over several years from the Fed's stimulus measures amid a weak economy as the metal is seen as a safe-haven investment. Last year, though, gold ended a 12-year bull run hurt by an improving labour market and rallying equities.
Several analysts have forecast another drop in gold prices this year. Bank of America Merrill Lynch lowered its 2014 average gold price forecast to $1,150, citing an uncertain macro-economic environment and lack of investment demand.
Barclays said it expects gold prices to average $1,205 and test 2010 lows this year.
Gold-backed exchange-traded products saw outflows of $40 billion last year, according to data from asset manager BlackRock.
"If (nonfarm payrolls data) comes in higher than forecast, as we suspect will be the case, we should see another spurt higher in the dollar," INTL FCStone analyst Edward Meir said.
"Gold will then likely have to dodge another potential hit that could come its way."
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