Gold rises as US payrolls data misses forecasts
London (Sept 5) Gold prices rose on Friday, recovering from their lowest in nearly three months, after US payrolls data for August missed expectations, tempering speculation that US interest rates were set to rise sooner rather than later.
The metal hit its weakest since mid-June earlier on Friday and is on track to end the week lower, suffering after gains in stock markets. The European Central Bank's surprise interest rate cut on Thursday further boosted the appeal of equities.
Spot gold was up 0.4 percent at $1,266.00 an ounce at 1402 GMT, while US gold futures for December delivery were up 60 cents an ounce at $1,267.10.
The metal rose to a session's high of $1,273.45 an ounce in the wake of the data, but quickly pared gains.
"Gold initially received a boost from the worse-than-expected job report on the dual assumption that it could dampen the prospect for higher interest rates and more importantly that it could help trigger some long liquidation of the dollar," Saxo Bank's head of commodity research Ole Hansen said.
The Labor Department said on Friday that US job growth slowed sharply in August and more Americans gave up the hunt for work, giving a cautious Federal Reserve more reasons to wait a bit longer before raising interest rates.
Nonfarm payrolls rose 142,000 last month, the smallest increase in eight months. US short-term interest rate futures contracts rose after the report, leading traders to boost bets the Fed will not raise interest rates until the second half of 2015.
Markets now assign a roughly 68 percent chance of a first Fed rate hike in July 2015, compared with 72 percent before the data. The euro hit a session high against the dollar and European shares pared losses on Friday after the data.
A loosening of monetary policy is nominally positive for gold, Swiss bank UBS said in a note on Friday, but any impact of the new measures in the euro zone is likely to be offset by gains in the dollar.
"It would have to take more aggressive action from the ECB, which is likely to come alongside a sharp deterioration in euro zone growth, for gold to benefit significantly," it said.
In the main physical gold markets, where demand has been soft in recent months, buying picked up slightly. Premiums in China, the top buyer of gold, rose to $4 to $5 an ounce above spot prices, from $3 in the previous session.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund and a good measure of investor sentiment, said its holdings fell 4.78 tonnes to 785.73 tonnes on Thursday - the biggest one-day drop since April 16.
Among other precious metals, silver was up 0.3 percent at $19.09 an ounce, while spot platinum was flat at $1,403.74 an ounce and spot palladium gained 0.4 percent to $886.97 an ounce.