Gold price remains stuck in narrow band
Washington (May 8) Gold edged higher on Friday after two days of losses, but prices held in a narrow range ahead of key US nonfarm payrolls data, which will be closely watched for further clues on the timing of an expected US rate rise.
A recent run of mixed economic data has pushed earlier expectations for the US Federal Reserve to announce a rate rise at its June policy meeting back to later this year.
A strong jobs report would support the view that the Fed will act sooner rather than later, pressuring gold. Rising rates tend to lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
Spot gold was up 0.2% at $1,186.46/oz at 9.52am GMT, while US gold futures for June delivery were up $3.70/oz at $1,185.90.
Prices have been stuck in a narrow range of around $50/oz since mid-March, as uncertainty over US monetary policy pushed traders to the sidelines.
"Gold is desperately looking for direction, which makes today’s nonfarm payrolls report particularly important," Saxo Bank’s head of commodity research, Ole Hansen, said.
"September or even December is currently the most likely timing of a change in rates," he said. "A bigger than expected rise may once again bring forward the timing and support the dollar, thereby creating some headwind."
Analysts polled by Reuters expect nonfarm payrolls to have increased by 224,000 in April after a meagre 126,000 gain in March.
The possibility of a strong jobs report was also reinforced by Thursday’s data on weekly claims for unemployment benefits, which held near a 15-year low last week in a sign that the labour market was strengthening.
Reflecting investor anxiety, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 2.7 to 739.07 tonnes on Thursday.
On the wider markets, European shares surged 1.5%, led by a rise in UK stocks after early poll results showed Prime Minister David Cameron’s Conservatives were set to govern Britain for another five years.
A surge in sterling helped keep the dollar index little changed, despite a 0.25% rise versus the euro.
Silver was up 0.2% at $16.36/oz, while platinum was up 0.4% at $1,133.49/oz and palladium was up 1% at $785/oz.