Gold held most of its strong gains from Friday, when weak USA jobs data led investors to bet that a September rate rise was no longer on the cards, sending the dollar spiralling down.
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“Markets are expected to be quiet till European Central Bank’s interest rate decision on Thursday”, said Kent Li, deputy in-charge for bullion desk, Wing Fung Precious Metals.
Gold rose to a fresh two-and-a-half-week high on Wednesday after gaining almost 2 per cent in the previous session, as disappointing US economic data reinforced expectations the US Federal Reserve will keep rates on hold in September.
Analyzing the impact on gold prices of ETF holdings and also the size of net bullish betting by hedge funds in Comex gold derivatives, “The results are extremely intuitive”, the research concludes, finding that – for a 10% increase or decrease in ETF flows, the gold price would rise or fall “by approximately 3%” from current levels, “or about $41 per ounce”.
Spot gold fell 0.1% to $1,344.25 an ounce by 3.32pm GMT, with United States gold futures also down 0.1% at $1,348.20. “Also there has been some tightening of real yields”, HSBC analyst James Steel said in a note.
“Any uncertainty, geopolitical tensions and, most importantly, a sense that the Fed will push back the next rate rise should put a near-term floor on gold prices”.
The US economy expanded at a modest pace in July and August, the Federal Reserve said on Wednesday, but there was little sign that wage pressures are being felt beyond highly skilled jobs.
Spot gold faces a resistance at $1,352 per ounce, it may either hover below this level or retrace to a support at $1,327, according to Reuters technical analyst Wang Tao.
Prices have largely moved in concert with the dollar – against a basket of currencies it recently hit a multi-week low and was last trading at 94.56. When the USA dollar retreats, it encourages holders of global currencies to buy dollar-denominated gold.
Holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, rose 1.52 per cent, its biggest one-day gain since July 5, to 952.14 tonnes on Tuesday from 937.89 tonnes on Friday.
Platinum fell about one per cent to $US1,084.99 per ounce after hitting a two-week high of $US1,105.80. It touched an over three-week high in the previous session.
Palladium was down 1.1 per cent at $US687.60 after touching an over two-week high of $US708.40.
Silver retreated from yesterday’s near 4-week highs at $20.13 per ounce, recovering half of an overnight 40 cents drop. On Wednesday the metal scaled its highest in more than two weeks.
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