Gold price slips again, $1,300/oz in its sights

Sep 1, 2016 – 2:23 PM GMT
Gold futures declined for the eighth session in 10 days in the US on Thursday morning and are quickly approaching $1,300, with positive US data fuelling a surge in the dollar.Gold for December settlement on the Comex division of the New York Mercantile Exchange declined $3.30 or 0.3 percent to $1,308.10 per ounce. The contract is trading at its lowest since June 23.The metal has been one of the biggest losers following last week’s Federal Reserve symposium. Beforehand, prediction markets had discounted a 2016 rate increase but a coordinated hawkish message from top Fed officials has reinvigorated speculation that even a September rise is on the table.

Optimistic sentiment has been validated in recent days – fresh data has shown the US economy heading for its eighth year of expansion, which has pushed the dollar index to a multi-week high. It was last at 96.09.

“Gold prices are under pressure but attention is fixed on Friday’s July unemployment data. Against this ‘wait and see’ climate is apparent ongoing division among Fed policy makers based on recent public comments and speeches,” HSBC analyst James Steel said.

Investors are now keenly awaiting blockbuster US employment data to gauge the direction of gold prices before the start of the holiday weekend – economic consensus is for 186,000 jobs to have been added in August.

In a preview of the Friday employment report, the ADP non-farm employment change at 177,000 beat the forecast of 173,000.

“If the official US labour market data that are due to be published tomorrow turn out to be as good as the ADP’s figures that were published yesterday, the gold price is likely to come under further pressure,” Commerzbank said in a note. “This is because this would presumably add further fuel to expectations of a US Federal Reserve rate hike before September is out.”

In the exchange-traded funds followed by FastMarkets, holdings dropped 11.2 tonnes to 2,105 tonnes – another sign that investors are looking elsewhere after the dollar surged and general poor backdrop for safe-haven assets.

“Dollar strength and signs of disinvestment from institutional investors continue to create short-term pressure for gold,” FastMarkets analyst James Moore said. “Further dip-buying support is expected; however, bearish signals from silver could a precursor for weakness in gold, with a breach of $1,300 likely to generate deeper downside pressure.”

In data, US Challenger job cuts year-over-year in August fell 21.8 percent, off the previous 57.1 percent. Weekly unemployment claims for August 18-25 at 263,000 were below the 265,000 forecast and, more importantly, the psychological 300,000 mark.

Revised non-farm productivity quarter-over-quarter in the second quarter was in line with estimates at -0.6 percent while revised unit labour in the same period was at 4.3 percent – it was expected at 2.0 percent.

The final manufacturing PMI, the ISM manufacturing PMI, construction spending, ISM manufacturing prices and total vehicle sales are all due for release later.

Turning to European markets, Germany’s DAX and France’s CAC-40 were up 0.3 percent and 0.9 percent respectively while the dollar gained 0.1 percent to 1.1144 against the euro.

As for other precious metals, Comex silver for September delivery was virtually unchanged at $18.630 per ounce. Trade has ranged from $18.585 to $18.720. Platinum for October settlement fell $1.0 or 0.1 percent to $1,052.50 per ounce while palladium at $672.15 was up $3.45.

(Editing by Mark Shaw)

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