Morning Gold: Gold Heading To its Poorest Week in a Month

Gold & Dollar

(Reuters) – On Friday, gold dropped to a two-week low, on the road for its worst week in a month as U.S. yields and the dollar are stronger on prospects that an upbeat jobs report may help the Federal Reserve to withdraw stimulus earlier.

The strong U.S. jobless profits and factory data led to losses of about 3.5% over the past five sessions, which pressured gold under the technical resistance level of $1,300 an ounce.

Spot gold dropped as much as 1.9% to reach $1,283.29 an ounce earlier in the session and was trading down 1.5% on $1,287.10 by 0951 GMT. December U.S. gold futures for delivery decreased $24.70 to reach $1,286.50 an ounce.

The London A.M. fix is $1,285.75.

Driven by assurance over the U.S. economy, the USD held stronger above a six-week low hit on Wednesday, European shares hit a new two-month high and benchmark U.S. Treasury yields trimmed to a two-year high over 2.7%.

Saxo Bank senior manager Ole Hansen said “If we get a surprise stronger number (from nonfarm payrolls) than the market currently expects, it will increase appetite for the dollar, selling pressure on bonds and buying of stocks and of course the combination of the three is really anti-gold,” he added “Obviously, a strong number would enhance the view of Fed tapering in September,”

The Fed has said its policy is still stirred by data, but it didn’t give any new signs in a statement on Wednesday that it was ready to taper down its monetary stimulus at its upcoming policy meeting in September.

Market watchers, thus, are looking to U.S. data for signs on the tapering could begin.

A Reuters survey pointed to a monthly rise of 184,000 with the jobless rate shown decreasing to 7.5%, the lowest level in more than four years. Nonfarm payrolls at 1230 GMT are predicted to display a solid increase in July

SPDR Gold Trust, the world’s largest gold-backed exchange-traded (ETF) fund, holdings dropped 0.7% to reach 921.05 tons on Thursday, a fresh hit of four-year lows.

Reuters tracked outflows from the top eight gold ETFs have totaled 19 million ounces so far this year, or around $25 billion at current prices.