Gold futures rally from three-month low above $1,170, as dollar retreats

June 8, 2015

San Francisco (Jun 8)  Gold futures ticked up on Monday rebounding from three-month low's at the end of last week, as the dollar retreated from a strong rally on Friday.

On the Comex division of the New York Mercantile Exchange, gold for August delivery gained 3.60 or 0.31% to 1,171.70 a troy ounce. Gold futures traded in a tight range between $1,168.10 and $1,177.00 on the first day of trading this week.

On Friday, gold fell to a 13-week low at $1,162.10, as the dollar soared amid a robust U.S. jobs report. The sell-off extended previous losses last week when gold retreated after reaching a high of $1,204.70 on June 1.

Gold likely gained support at 1,162.10 the low from June 5 and was met with resistance at 1,232.80, the high from May. 18. Gold futures are down more than 4.5% since reaching a three-month high in mid-May, as a wave of optimistic economic data has increased the possibility that the Federal Reserve could raise interest rates in September.

The U.S. Department of Labor said on Friday that non-farm payrolls increased by 280,000 last month, far exceeding expectations for a 220,000 gain. More importantly, average hourly wages rose by 0.3% in May, above analysts' forecasts for a 0.1% gain. The Fed would like to see significant improvements in wage and GDP growth before it decides to lift its benchmark Fed Funds Rate for the first time in nearly a decade.

Gold, which is not attached to dividends or interest rates, struggles to compete with high-yield bearing assets in periods of rising interest rates.

Following the strong jobs report on Friday, the dollar surged nearly 1% -- posting its best one-day move in more than seven sessions. Previously, the dollar moved lower on three consecutive sessions as a sell-off in European sovereign debt spilled over into U.S. bond markets. At one point last week, yields on U.S. 10-Year Treasuries soared above 2.4%, its highest level since October.

On Monday, the U.S. Dollar Index fell 0.85% to 95.65, as currency traders locked into profits from late last week. The U.S. Dollar Index measures the strength of the greenback versus a basket of six other major currencies. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Elsewhere, European Central Bank governing council member Christian Noyer told Reuters on Monday that if Greece left the euro zone it would not create a problem for the currency bloc. The comments come several days after Greece delayed a EUR 300 million loan repayment to the International Monetary Fund, opting to bundle four obligations due this month into one EUR 1.1 payment at the end of June. Greece only has a "matter of days," to reach a deal with its international creditors to unlock critical aid deemed necessary to stave off bankruptcy, Noyer added.

In Germany, U.S. president Barack Obama urged both sides to work collaboratively to reach a deal. "The Greeks are going to have to follow through and make some tough political choices that will be good for them long-term," Obama said at a news conference. In addition, Obama added that international lenders should "recognize the extraordinary challenges," that Greece is encountering and should work to reach an accord.

Gold is viewed as a safe-haven for investors in periods of severe global economic instability.

Silver for July delivery fell 0.066 or 0.41% to 15.918 a troy ounce.

Copper for July delivery gained 0.002 or 0.09% to 2.695 a pound.

In China, the nation's trade surplus widened to $59.5 billion in May, up from $34.2 billion a month earlier. Exports fell by 2.5% on a year-over-year basis, while imports declined by more than 17%. China is the world's largest consumer of copper, comprising approximately 40% of the world's global demand.


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