November 1, 2012 / 12:52 AM / 7 years ago

Gold retreats below $1,720/oz, U.S. jobs data eyed

LONDON (Reuters) - Gold prices eased on Thursday as the dollar firmed, but moves were muted as investors stayed focused on U.S. employment data due on Friday for clues on monetary policy.

Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh May 8, 2012. REUTERS/Ajay Verma

A jump in U.S. stocks after well-received economic data lent some support to gold, while European shares were also bolstered by a well received earnings report from Royal Dutch Shell (RDSa.L).

By 4:25 p.m. EDT (2025 GMT), spot gold was down 0.3 percent at $1,713.89 an ounce. U.S. gold futures for December settled down 0.2 percent, or $3.60, at $1,715.50.

In early October, gold prices rallied to nearly $1,800 an ounce after the Federal Reserve announced new monetary stimulus measures, which tend to help gold by fuelling fears of inflation and maintaining pressure on interest rates.

Gold has also benefited from fears that the United States could face a ‘fiscal cliff’ if lawmakers fail to avert looming tax hikes and cuts to public spending, which are due to kick in at the start of next year.

“Before the elections on Tuesday, the non-farm payrolls will be quite a big deal,” Natixis analyst Bernard Dahdah said. “(Further out), we have the fiscal cliff in the next two months. If you have more issues with that, that will definitely send the price of gold higher.”

With the extent of the Fed’s latest stimulus measures largely dependent on the health of the U.S. labor market, Friday’s non-farm payrolls data will be closely watched.

Analysts in a Reuters poll expected the economy to have added 125,000 jobs last month, with the unemployment rate seen at 7.9 percent, against 7.8 percent the previous month.

“The ongoing (U.S. stimulus) program Operation Twist (exchange of bonds with short maturities to ones with long maturities) will expire by the end of the year, thus forcing the Fed to decide whether to pump further liquidity into the economy or not at its December meeting,” Commerzbank said in a note.

“That means disappointing data is likely to cause speculation about an increase of QE3 towards year-end, thus putting pressure on (the dollar), while surprisingly positive results reduce this likelihood.”


Technical analysis suggested that spot gold may rebound marginally to $1,736 an ounce, as indicated by a falling channel and a Fibonacci retracement analysis, according to Reuters market analyst Wang Tao.

ScotiaMocatta said in a note that the precious metal was challenging resistance at $1,721. “Support is at $1,693, the 38.2 percent retracement of the May-to-October uptrend, followed by $1,661, the 50 percent retracement level,” it added.

On the physical markets, traders in India took to the sidelines, waiting for a further price correction to buy. Those betting on higher prices are expecting Indian demand to rise this month as festival season peaks during Diwali.

“Gold prices ... may be helped by a pickup in Indian festive buying ahead of Diwali and the Indian wedding season,” HSBC said in a note.

Russian gold companies increased gold production by 3.1 percent in the first nine months of 2012 compared with the same period of last year, an industry lobby said.

Among other precious metals, spot platinum was up 0.2 percent at $1,563.75 an ounce, and palladium was up 1.5 percent at $609.22 an ounce. Silver was up 0.2 percent at $32.26 an ounce.

Anglo American Platinum (AMSJ.J) said it did not have sufficient staff at its strike-hit mines in South Africa to operate as workers had not yet accepted a company offer to reinstate sacked miners and return to work.

The world’s top platinum producer said it was losing an average of 3,694 ounces of platinum per day due to the strike, which is now in its seventh week. To date, 141,640 ounces of platinum have been lost, it said.

Editing by Keiron Henderson and Jane Baird; Editing by David Gregorio

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