LONDON. — Gold slipped yesterday as the dollar and equity markets strengthened, while investors awaited a European Central Bank (ECB) meeting and US jobs data to gauge the strength of the global economy and the fate of stimulus measures by central banks.
Strong figures from payrolls processor ADP heightened expectations that June US non-farm payrolls that was due at midday would show the US economy was picking up speed after a dismal start to the year.
A Reuters poll forecast non-farm payroll gains of 212 000, which would mark a fifth month above 200 000.
Spot gold was down 0,4 percent to $1 322,70 an ounce mid morning. It hit a three-month high of $1 332,10 earlier this week as tension in Iraq and Ukraine stoked demand for the metal as an insurance against geopolitical risk.
US gold futures for August delivery were down 0,5 percent at $1 323,90 per ounce. The dollar rose 0,1 percent against a basket of currencies, while world shares hovered below record highs.
A stronger US currency makes dollar-denominated assets such as gold more expensive for foreign investors. The metal tends to hold an inverse correlation with equity markets, with investors seeking refuge in gold when appetite for risk diminishes.
“The dollar gained some strength on the back of yesterday’s data, which is not supportive for gold but unless there is a significant surprise in the US nonfarm payrolls, we don’t see gold collapsing,” Natixis analyst Bernard Dahdah said.
“Prices should come under pressure below $1 300 in the longer term, as the US economy gets gradually better and investors find fewer reasons to put their money into safe assets like gold.”
Data on Wednesday showed that US private-sector hiring hit a one-and-a-half-year high in June.
“Given the factors currently lined up against gold — positioning, weak physical markets, and potentially strong employment — any sign of resilience in the face of stronger data will be an important signal that investors may be becoming friendlier to gold,” UBS said in a note.
“On the other hand, weaker than expected US data today is likely to perpetuate the generally sanguine mood in the gold market of late.”
The technical picture also looked weak with Reuters technical analyst Wang Tao saying gold may retrace to $1 316 as it has failed to break a resistance at $1 334 twice.
Meanwhile, physical demand for gold has been lacklustre due to the recent rally in prices. In top buyer China, domestic prices were at a discount of $1per ounce-$2 per ounce to global prices, underscoring sluggish demand.
In other precious metals, platinum was unchanged on the day at $1 501,20 per ounce, holding close to a 10-month high of $1 517,50 hit on Wednesday as supply worries persisted even after producers in South Africa resumed work after a five-month strike.
Palladium was also supported near its highest in three weeks at $855 per ounce, while silver dropped 0,3 percent to $21,03 per ounce. — Reuters.