Gold struggles after release of strong US data

May 16, 2014

Singapore (May 16)   Gold struggled below $1,300 an ounce on Friday as US jobs and factory data indicated brighter prospects for the economy, hurting the metal’s appeal as an investment hedge. Platinum was headed for its best weekly gain in three months on supply worry from prolonged strikes in South Africa, while palladium was also poised for a weekly jump.

New applications for US unemployment benefits hit a seven-year low last week while consumer prices recorded their largest increase in 10 months in April. Factory activity in New York state expanded at its quickest pace in nearly four years in May.

Spot gold was little changed at $1,296.70 an ounce by 3.45am GMT, after dropping 0.7% on Thursday.

"Despite Thursday’s modest sell-off in gold, we remain constructive on the precious metal short term, as there are too many geopolitical hotspots that still have the capacity to flare up rather unexpectedly," INTL FCStone said in a note.

The metal is still up 0.6% for the week on earlier gains from political uncertainty in Ukraine, which has increased tension between Russia and the West.

Gold is often seen as a safe-haven investment compared with riskier assets such as equities.

Investor interest perked up with SPDR Gold Trust, the world’s biggest gold-backed exchange-traded fund (ETF), showing a modest increase in flows. Holdings in the fund rose 1.79 tonnes to 782.25 tonnes on Thursday — the first inflow in a month.

US data also showed that hedge fund Paulson & Co in the first quarter maintained its stake in SPDR as bullion prices rebounded from their biggest annual loss in 32 years in 2013, while Pimco dissolved its gold ETF investment.

In news among other precious metals, platinum producer Lonmin said on Thursday it could go to court in a bid to stop the 16-week strike in the platinum belt because of the levels of violence faced by workers who wanted to return to work.

The current stoppage has hit about 40% of global production of the precious metal used for emissions-capping catalytic converters in cars, with about 880,000oz lost to date, according to Reuters’ calculations.

Platinum was headed for a 3% weekly jump, while palladium was up nearly 2%.

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