Gold price fell 1.2% on Monday as investors awaited U.S. data due to be released later in the week that could provide clues on timing of when the Federal Reserve will begin curbing its monetary stimulus programme.
The awaited U.S. data include third quarter GDP, the nonfarm payrolls and manufacturing PMI. These data should be giving more insight into the strength of the world’s biggest economy.
Gold investors feared that strong recovery could prompt the Fed to begin scaling back its $85 billion in monthly bond purchases, which would hurt safe-haven assets value such as bullions.
The U.S. central bank next meeting to decide the fate of its stimulus is on December 17-18.
Saxo Bank senior manager Ole Hansen said that gold bugs are starting the week and month on a weak footing, carrying on a little bit of “the themes” that they left behind last week. The investor’s focus is back on the U.S. data, with the non-farm payrolls due on Friday.
Gold price for immediate delivery fell as much as 1.2% to a one-week low at $1,237.04 an ounce and was down 1.1% to $1,237.60 by 10:39 am GMT. The last trading gold session of November on Friday closed down by 5.4%, the biggest gold price monthly decline since June and its third straight month of losses.
U.S. gold futures Comex, fell by 1.1% to $1,235.80 an ounce.
On the other hand, the dollar value rose 0.2% against a basket of currencies, while U.S. Treasury yields rose close to 2.8%.
Hansen said that there is a bit a euro/dollar weakness, which is weighing gold down. He added that last week, bond yields and the dollar were weak but there wasn’t enough support. According to Hansen, the overall sentiment remains weak and there’s not really a strong motivation to buy at the moment.
The yellow metal loss in value this year is mainly due to a record outflows from gold-backed exchange-traded funds (ETFs), as signs the world’s economy was at least stabilizing, pushing investors to shift their money to rallying equities.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, holdings lost more than 450 tonnes this year to reach their lowest level since early 2009 at 843.21 tonnes this year.
Barclays said in a note that if equity markets remain firm and if gold prices breach $1,200 resistance, the price weakness of the precious metal is likely to intensify.
Physical demand on gold has picked up at lower price levels but not to the same extent as earlier this year when a $200-an-ounce drop in two days prompted record levels of buying.