Gold drops as short-covering rally fizzles
Singapore (Nov 10) Gold slipped nearly 1 percent on Monday as investors adjusted positions after a short covering rally, fuelled by a softer-than-expected US jobs report, and as stronger equities and bearish sentiment continued to weigh on the metal.
Despite a 3 percent jump on Friday, gold remained below a key $1,180-an-ounce level that could pressure the metal back to 4-1/2-year lows reached last week on a strong dollar and fears regarding an upcoming rate hike by the US Federal Reserve.
Gold got a boost after US nonfarm payrolls increased 214,000 in October versus a projected 231,000, hurting the dollar and boosting the metal's appeal as a hedge. But other details of the report were solid with the unemployment rate dipping to a fresh six-year low of 5.8 percent.
"The rally on Friday may well be overdone as investors mull over the US data and realise the jobs data actually wasn't all that bad," said Sam Laughlin, metals dealer at MKS Group.
"We are looking towards resistance around $1,180-85 while support will be sitting around Friday's low print of $1,130."
Spot gold fell as much as 0.9 percent to $1,168.10 before recovering slightly to trade down about $8 at $1,170.81 by 0724 GMT. It fell to $1,131.85 on Friday - its lowest since April 2010 - before recovering to post its biggest one-day gain in five months.
Asian shares gained on Monday, while the dollar edged lower.
Investor positions show the sentiment towards gold remains bearish and it could plumb new lows before the end of the year.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.78 percent to 727.15 tonnes on Friday - its lowest in six years.
Speculators slashed their bullish bets in gold futures and options to their lowest in four weeks, the Commodity Futures Trading Commission said on Friday.
Analysts and traders surveyed by Reuters predicted that gold prices could fall to $1,000 by the end of the year for the first time since 2009.
The case against gold comes from a stronger dollar, a robust equities market and an improving US economy - a factor that could also prompt the Fed to tighten monetary policy.
The lack of key US data means this week may lead gold higher as the focus remains on the jobs report, said Howie Lee, an investment analyst at Phillip Futures.
"However, this technical rebound is expected to be minor and I won't expect it to breach past $1,185, if it does rebound" he said.