Gold inched higher to hold just below $770 an ounce, supported by slightly firmer oil prices, as traders took to the sidelines ahead of this afternoon’s key US jobs data.
Spot gold was quoted at $769.60/771.60 an ounce at 1007 GMT, little changed from $765.70 an ounce late in New York on Thursday. The foreign exchange markets, which usually have a significant impact on gold, were quiet as traders awaited direction from the US non-farm payrolls data, due at 1330 GMT.
“This is the most important figure to be released and will have a significant impact on those markets which drive the gold price,” said Dresdner Kleinwort consultant Peter Fertig. A stronger-than-expected fall in the payrolls number “would definitely be regarded by the markets as a sign of a deeper and more prolonged recession in the United States,” Fertig said, adding that it could knock stock markets and crude oil prices lower.
Economists polled by Reuters said they expect US payrolls to fall by more than 300,000 in November as weakening consumer and business demand prompted companies to cut jobs. The dollar, a key external driver of gold, was steady ahead of the announcement.
Gold is often bought as a hedge against weakness in the US currency, and trades in the opposite direction to it. A larger-than-expected number could pressure the dollar as it would signify more trouble for the US economy, but if risk aversion is boosted, the US currency could rise as investors turn to dollars as a haven from risk.
Oil, however, lent some support to gold as it managed to inch up above $44 a barrel. However, sharp falls in the crude price this week have sent oil down to near a four-year low. Firmer oil prices can boost interest in commodities as an asset class, according to analysts.
However, gains in gold are being limited by expectations inflation will fall after sharp drops in the price of many raw materials such as crude oil and industrial metals. Oil prices have shed more than $100 a barrel since they hit an all-time high of $147.27 an barrel in July, while prices of copper, aluminium and tin have also declined sharply. “(Gold) prices (are) slipping due to near term deflationary pressures as commodities slip,” said John Meyer, an analyst at Fairfax. “However, the yellow metal has been outperforming other commodities and equities.” (Reuters)