Gold hits two-week high on weak dollar before U.S. jobs data

LONDON Fri May 3, 2013 4:41pm IST

A sales attendant shows a gold bracelet to customers leaning over a half-empty display case at a jewellery store in Hong Kong April 26, 2013. REUTERS/Bobby Yip/Files

A sales attendant shows a gold bracelet to customers leaning over a half-empty display case at a jewellery store in Hong Kong April 26, 2013.

Credit: Reuters/Bobby Yip/Files

Related Topics

Rajalakshmi (C), 28, smiles after winning the Miss Wheelchair India beauty pageant in Mumbai November 26, 2014. REUTERS/Danish Siddiqui

Miss Wheelchair India

Seven women from across India participated in the country's second wheelchair beauty pageant, which aims to open doors for the wheelchair-bound in modelling, film and television, according to organisers  Slideshow 

LONDON (Reuters) - Gold jumped to two-week highs above $1,480 an ounce on Friday, heading for its second straight weekly gain, as the dollar fell ahead of U.S. nonfarm payrolls report, scheduled for 1230 GMT.

Sentiment had improved after a cut in interest rates by the European Central Bank and the U.S. Federal Reserve's decision to stick to its stimulus programme.

Spot gold rose as much as 1.5 percent to its highest level since April 15 at $1,485.86 an ounce. It stood at $1,485.74 by 1029 GMT, still up 1.3 percent. The metal broke strong chart resistance at $1,480, which may trigger further short-term strength, traders said.

U.S. gold for June delivery rose to a session high of $1,487.20 an ounce and was then at $1,485.90, up 1.3 percent.

"Gold gained some strength after the central banks' meetings and is now benefiting from the weaker dollar," Danske Bank analyst Christin Tuxen said.

"A lower-than expected nonfarm payrolls reading may lead to speculation that the Fed may have the exit from QE postponed further into the future, and that should be also a positive for gold because it means that there is going to be a lot more liquidity around and maybe some more dollar weakness."

The dollar fell against a basket of currencies as investors focused on whether a jobs report will add to concerns about the U.S. economy and boost bets on more monetary easing.

Analysts polled by Reuters expect the April U.S. nonfarm payrolls report to show American employers hired 145,000 people last month, up from March's dismal pace of 88,000.

Employment data in Europe and the United States are likely to be closely scrutinised in coming weeks for more clues on the longer-term prospects for the Fed's monetary stimulus.

"There will be a lot of focus on macroeconomic data in the coming weeks and months, especially on employment, indicators of price pressures and the impact of fiscal policy on growth," UBS analyst Joni Teves said in a note.

The ECB cut its main interest rate by 25 basis points to a record low of 0.50 percent on Thursday, its first change for 10 months, after inflation fell well below the bank's target and weak economic surveys increased doubts about a recovery.

The decision came a day after the U.S. Fed's recommitment to its aggressive stimulus programme, and a month after the Bank of Japan stunned markets by promising to inject about $1.4 trillion into its economy to spur growth.

Easy monetary policy extended gold's bull run to a 12th consecutive year last year, as investors bought bullion to hedge against inflation and economic uncertainties.

But inflation readings were lower recently and are not likely to show changes in coming months, analysts said.

"The fact that there is no such thing as hyperinflation scenario for at least the western countries and is more or less on people's radar even though we have quantitative easing policies and that's why we think gold will suffer in the medium term," Tuxen said.

ETFs HOLDINGS KEEP FALLING

Prices plunged to $1,321.35 on April 16, their lowest in more than two years, after a drop below $1,500 led to a sell-off that stunned investors and prompted them to slash holdings of exchange-traded funds.

Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, posted the deepest fall in one week, down 0.56 percent to 1,069.22 tonnes on Thursday, the lowest level since September 2009.

But the drop in prices also spurred purchases of gold bars, coins and nuggets across Asia and in other parts of the world, keeping physical premiums at multi-year highs of around $3 an ounce to the spot London prices for a few weeks.

Other precious metals tracked gold higher, with platinum shrugging off a report by consultancy GFMS that projected a surplus in the global platinum market this year.

But unrest in the South African mining sector could push prices as high as $1,750 an ounce, GFMS added.

Platinum was up 1.4 percent to $1,514.50 an ounce. Palladium rose 1.7 percent to $700.72.

Silver rose 2.1 percent to $24.30 an ounce. (Additional reporting by Lewa Pardomuan in Singapore; editing by James Jukwey)

FILED UNDER:

SAARC Summit

REUTERS SHOWCASE

E-Commerce Boom

E-Commerce Boom

Online grocers come up trumps in India's e-commerce boom   Full Article 

Reuters Poll

Reuters Poll

GDP growth to slow to 5.1 pct, but no rate cut yet  Full Article 

Oil Prices Fall

Oil Prices Fall

Oil at four-year low as OPEC production cut looks unlikely  Full Article 

Google in Europe

Google in Europe

Insight - Behind Google's Europe woes, American accents  Full Article 

Vodafone Tax Dispute

Vodafone Tax Dispute

India advised against challenging Vodafone tax ruling - source  Full Article 

India-focused Funds

India-focused Funds

India-focused hedge funds up over 40 pct YTD - HFR  Full Article 

Trade Deal

Trade Deal

WTO postpones trade deal by a day after last-minute objection.  Full Article 

RBI Rate Hopes

RBI Rate Hopes

Markets pricing in rate cut, despite wary RBI  Full Article 

Land Disputes

Land Disputes

Disputes over land for industry on the rise in India, angering locals - charities  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage