Gold steadies as post-payrolls data dip loses steam

09/08/2016 08:53 AST

Gold steadied after falling to a one-week low on Monday as downward momentum from stronger-than-expected U.S. jobs figures late last week lost steam, with concerns over negative global economic sentiment lending support.

The payrolls data on Friday reignited speculation that the Federal Reserve could press ahead with interest rate hikes later this year.

Spot gold was up 0.07 percent at $1,335.99 an ounce by 3:39 p.m. EDT (1939 GMT), after dipping to $1,329.55, the lowest since July 27. U.S. gold for December delivery settled down 0.2 percent at $1,341.30.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

"The U.S. is not hiking rates as fast as we expected them to, and so the macro environment is still favorable to gold," Deutsche Bank mining analyst Frank Nganou said.

"At the moment, it's all about central banks and whether they stay dovish. Every bit of information from the U.S. will move gold."

The U.S. dollar rallied against the yen amid firming bets for a U.S. interest rate hike late this year, U.S. equity indexes receded.

"Last week's solid U.S. nonfarm payrolls has introduced a degree of uncertainty into the bull market for gold," said Allocated Bullion Solutions in a report, adding that it is targeting $1,500 by the end of 2016.

"While we expect the global geopolitical outlook to remain uncertain we are increasingly confident that the U.S. economy is accelerating and that the Federal Reserve will hike the funds rate 25 basis points by year-end."

Speculators added net longs in COMEX gold futures for the first time in a month in the week to Aug. 2, though they remained below last month's highest level in more than two years, while they cut it in silver for the first time in two months.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund (ETF), saw their biggest one-day rise on Friday since late June.

"Gold remains overbought ... evidenced by large net long positions in COMEX and ETFs, and we feel is vulnerable to further downside in the short term," MKS said in a note.

Among other precious metals, silver was up 0.25 percent at $19.71 an ounce after hitting a near two-week low at $19.56. It fell 3 percent on Friday.

Platinum gained 0.7 percent at $1,150.2 while palladium was up 0.07 percent at $694.50.

Reuters