SINGAPORE, Sept 7: Gold eased on Friday from a near six-month top hit in the previous session, as upbeat data from a struggling U.S. Labour market dimmed hopes of more stimulus measures from the Federal Reserve.
Bullion had rushed to its loftiest since early March in the previous session after the European Central Bank unveiled a new and potentially unlimited bond purchase plan to lower borrowing costs of debt-laden nations, in the latest effort to fight the euro zone debt crisis.
But now the market focus is riveted on the key U.S. non-farm payrolls data scheduled for release later in the day, especially after payrolls processor ADP said the U.S. private sector added the most jobs in August since March.
If the ADP figures foretell a strong U.S. August nonfarm payrolls report, it could strengthen the dollar and quash the case for a third round of monetary easing, also known as quantitative easing (QE3), by the Federal Reserve.
‘There is definitely long liquidation going on after the ADP number,’ said a Singapore-based trader.
‘People spent the whole of yesterday buying gold and it is a bit overcooked up here. Now we have good data and the market is struggling to see how it can get a bad payrolls data.’
Central bank’s cash printing raises inflation outlook and adds to gold’s attraction as a hedge against rising prices.
Spot gold fell 0.7 percent to $1,689.86 an ounce by 0333 GMT, off $1,712.91 hit on Thursday, its highest since March 12. Bullion was little changed from a week earlier, after two consecutive weekly gains.
U.S. Gold dropped 0.8 percent to $1,692.20.
Technical analysis suggested spot gold could retrace to $1,680 an ounce during the day, Reuters market analyst Wang Tao said.
But some analysts believe gold has room to rise as the U.S. Labour market is still weak enough for the Fed to take action.
‘We think the payrolls number will be very poor, which should be positive for gold as it would confirm that the Fed will do something at the next FOMC (Federal Open Market Committee) meeting,’ said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.
SocGen forecast the payrolls number grew by 70,000 in August, versus a consensus of 125,000 in a Reuters poll.
ETF HOLDINGS
Holdings of gold-backed exchange-traded funds hit a record high of 72.1 million ounces, or 2,044 tonnes, by Thursday. ETF holdings had gained more than 38 tonnes so far this year, with the majority of increase occurring since August when hopes for stimulus from central banks started to run high.
In Asia’s physical market, dealers continued to report scrap flow as prices remained near $1,700 an ounce.
‘We still see scrap flow today and there is even some buying interest crawling back in,’ said a Singapore-based dealer.
Silver prices fell 2 percent on both spot and futures markets. Spot silver dropped to as low as $31.95 an ounce, after hitting a five-month high of $32.98 in the previous session.
The Relative Strength Index plunged to around 70 from the previous session’s 80.452, its highest since April 2011 and suggesting the market was heavily overbought. An RSI reading above 70 indicates the underlying asset is overbought.
The most-active COMEX silver futures contract lost 2 percent to $32.04.
(AGENCIES)
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