Gold Price Ends Lower On Strengthening Dollar, Equity Markets
New York (Sept 3) Gold futures ended lower for a second straight session Thursday, as the continued uptick in global stock markets lured investors to the riskier assets, limiting the safe haven appeal of the precious metal with little support from a strengthening U.S. dollar.
Gold prices also reacted to some upbeat U.S. data that may tempt the Federal Reserve to raise interest rates despite China headwinds.
The European Central Bank in a significant move decided to leave its interest rates unchanged. ECB President Mario Draghi's dovish comments at the press conference hinting that the central bank may consider further stimulus measures, provided a shot in the arm for markets.
In some mixed economic news, the U.S. trade deficit narrowed more than expected in July, but weekly jobless claims increased more than anticipated. Investors now eagerly await the release of the employment report on Friday, which could give a strong indication of whether the Fed will decide to raise interest rates in September.
U.S. stocks were poised for modest gains this morning, limiting gold's safe haven appeal.
Gold for December delivery, the most actively traded contract, dropped $9.10 or 0.8 percent, to settle at $1,124.50 an ounce, on the Comex division of the New York Mercantile Exchange on Thursday.
Gold for December delivery scaled an intraday high of $1,133.80 and a low of $1,121.00 an ounce.
On Tuesday, gold prices for December delivery dropped $6.20 or 0.5 percent, to settle at $1,133.60 an ounce, as investors turned to the riskier equity assets after global stock markets rebounded and the dollar trended higher on some upbeat economic data from the U.S.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 682.59 tons on Thursday from its previous close.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 96.29 on Thursday, up from its previous close of 95.98 in late North American trade on Wednesday. The dollar scaled a high of 96.62 intraday and a low of 95.79.
The euro trended lower against the dollar at $1.1140 on Thursday, as compared to its previous close of $1.1227 in North American trade late Wednesday. The euro scaled a high of $1.1245 intraday and a low of $1.1089.
On the economic front, a Labor Department report on Thursday showed first-time claims for U.S. unemployment benefits rose more than expected in the week ended August 29, a day ahead of tomorrow's monthly jobs data. Initial jobless claims climbed to 282,000, an increase of 12,000 from the previous week's revised level of 270,000. Economists expected jobless claims to edge up to 273,000 from the 271,000 originally reported for the previous week.
With the value of exports rising and the value of imports falling, a Commerce Department report on Thursday showed U.S. trade deficit to have narrowed notably in July. The trade deficit narrowed to $41.9 billion in July from a revised $45.2 billion in June. The deficit was the smallest since February. Economists expected the deficit to narrow to $42.0 billion from the $43.8 billion originally reported for the previous month.
After reporting a substantial acceleration in the pace of U.S. service sector growth in the previous month, a report from the Institute for Supply Management on Thursday showed a modest slowdown in the pace of growth in August. The ISM's non-manufacturing index edged down to 59.0 in August from 60.3 in July, although a reading above 50 indicates continued growth in the service sector. Economists expected the index to dip to 58.5.
Eurozone retail sales increased in July after falling a month ago, data from Eurostat showed Thursday. Retail sales advanced 0.4 percent in July from the prior month, reversing a revised 0.2 percent fall in June. This was the fastest growth in three months. Economists had forecast sales to grow at a faster pace of 0.5 percent. The figure for June was revised from a 0.6 percent fall initially estimated.
Eurozone private sector growth improved more than estimated in August, final data from Markit showed Thursday. The final composite output index rose to 54.3 in August from 53.9 in July. The flash reading for August was 54.1. Output growth accelerated moderately in both the manufacturing and service sectors.
Germany's private sector growth accelerated more than initially estimated to a 5-month high in August, final data from Markit showed Thursday. The composite output index rose to 55 in August from 53.7 in July. The flash reading for August was 54.0. The index signaled the strongest increase in private sector output since March.
The French private sector growth slowed more than estimated to a 7-month low in August, final data from Markit showed Thursday. The final composite output index fell to 50.2 in August from 51.5 in July. It was well below the flash score of 51.3.
French unemployment rate held steady in the three months ended June, in line with expectations, figures from the statistical office Insee showed Thursday. The jobless rate, measured according to International Labor Organization, or ILO, standards, came in at 10.3 percent in the second quarter, the same rate as in the previous month. The figure was also matched with consensus estimate.
British services sector expanded at its weakest rate in over two years casting doubt about sustainability of economic growth into third quarter, a closely watched survey revealed Thursday. The services Purchasing Managers' Index dropped to 55.6, which was the weakest score since May 2013, survey results from Markit Economics and the Chartered Institute of Procurement & Supply showed. That was in contrast to economists' expectation for a modest improvement in the reading to 57.7 from 57.4 in July. The growth slowed for second straight month.