Gold firmed on Friday, edging
further above the previous day's six-week low as the dollar
steadied off a 10-month peak, but moves were muted ahead of key
U.S. payrolls data which could prompt a further wave of selling.
The payrolls numbers follow a raft of upbeat reports on the
U.S. economy, including signs of an improving job market. Data
showing the biggest rise in labour costs in 5-1/2 years in the
second quarter helped knock gold 1 percent lower on Thursday.
Spot gold was up 0.2 percent at $1,284.50 an ounce at
1202 GMT, off Thursday's low of $1,280.76, while U.S. gold
futures for December delivery were up $2.50 an ounce at
Analysts have said the Federal Reserve may take a more
hawkish stance on raising interest rates at its September policy
meeting in light of the recovering U.S. economy.
"Another gain in employment will really focus the mind on
the Fed's response," Mitsubishi analyst Jonathan Butler said.
"We heard earlier this week that they are maintaining their
accommodative monetary policy for some time after their
quantitative easing programme comes to an end. But clearly
investors are already starting to move on, and gold is having a
The closely watched July payrolls report is expected to show
233,000 jobs were added to the U.S. economy last month, the
sixth month in which employment has expanded by more than
200,000, a stretch last seen in 1997.
A strong reading has the potential to reignite a rally in
the dollar index, which in July posted its biggest monthly gain
since February last year.
"Gold and the U.S. dollar have a strong historical negative
correlation, as bullion is most frequently priced in dollar
terms," HSBC said in a note. "Expectations for a stronger dollar
may keep a lid on gold prices in the near to medium term."
ASIAN DEMAND STILL LACKLUSTRE
Demand for physical gold in Asia failed to pick up in a
robust way despite the price drop on Thursday, a dealer in Hong
Metals consultancy GFMS, a division of Thomson Reuters,
warned on Thursday that buying in the main physical gold markets
of China and India may not be strong enough to provide a floor
for prices this year.
"Strong physical demand from Asia, especially China,
arguably supported gold prices from falling further last year,"
GFMS analyst Sara Zhao told the Reuters Global Gold Forum.
"Weaker Chinese physical demand for the rest of the year
would see the gold price influenced more by Western investors'
sentiment, which fluctuates majorly by macro and geopolitical
Sales of American Eagle gold coins by the U.S. Mint dropped
about 40 percent in July from a year earlier.
Gold prices remain up 6.6 percent this year, but the bulk of
those gains were made in the first quarter. The metal fell 3.4
percent in July, its biggest monthly drop of 2014.
Among other precious metals, silver was up 0.1
percent at $20.37 an ounce, while spot platinum was down
0.1 percent at $1,453.74 an ounce and spot palladium down
0.3 percent at $864.72 an ounce.