Gold slips on steady dollar ahead of US data, policy meeting

July 28, 2014

London (July 28)   Gold fell on Monday as the dollar approached multi-month highs ahead of a series of economic data and policy releases, but prices held above $1,300 an ounce on heightened tension between the West and Russia, and violence in the Middle East.

Investors were awaiting the Federal Reserve’s policy meeting and second-quarter gross domestic product (GDP) data on Wednesday and non-farm payrolls figures on Friday, which will be used to gauge the strength of the economy and the outlook for the US central bank’s next cycle of interest rates tightening.

Spot gold was down 0.3% at $1,303.91/oz by 10.15am GMT. The metal logged its second consecutive weekly drop on Friday on strong US economic data.

US gold futures were up 0.1% at $1,304.40/oz.

Traders said the metal was likely to remain at about $1,300 ahead of the expiration of Comex gold options for August later in the day.

"Today, we have option expiry, with a lot of calls and puts in the $1,300 area ... if we close above that level then there will be more consistent support over the next few days when attention turns to the FOMC (Federal Open Market Committee) meeting and US data," MKS SA senior vice-president Bernard Sin said.

The dollar hovered near six-month highs against a basket of major currencies on Monday, holding on to solid gains made last week after positive US economic data.

Speculation that an improving employment sector in the US could signal an early rate increase by the Federal Reserve has pressured gold over the past several sessions, briefly pushing it under $1,300 to its lowest level in five weeks at $1,287.46 on Thursday.

Earlier this month, Fed chairwoman Janet Yellen said that the central bank could raise rates sooner than initially expected if labour markets continued to improve.

Higher interest rates would encourage investors to switch to assets that, unlike gold, pay interest.

Gold, seen as an alternative investment, was also sold as European stocks edged higher, despite a tumble in Russian shares after new European sanctions for Moscow.

Fierce clashes between Ukrainian troops and pro-Russian rebels continued on Sunday, after the 28-nation European Union reached an outline agreement on its first economic sanctions on Russia.

Fighting subsided in Gaza on Sunday after Hamas Islamist militants said they backed a 24-hour humanitarian truce but there was no sign of any comprehensive deal to end fighting with Israel.

"Gold will likely enjoy a measure of stability at least in the early part of the week on account of the deteriorating situation with Russia and the expected stiffer round of sanctions being contemplated by the Europeans," INTL FCStone analyst Edward Meir said in a note.

But the slew of US numbers later in the week that are likely to be good should boost equities and hurt gold prices, Mr Meir said.

Spot silver fell 0.3% to $20.60/oz, having touched its lowest since June 19 at $20.26 on Thursday.

Platinum rose 0.9% to $1,483.24/oz, while palladium gained 1.1% to $884.75/oz.


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