The precious metal hit a one-week high of US$1,328.73 on Friday after data showed United States employment growth slowed more than expected in August after two straight months of robust gains.
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Gold prices rose almost 2 percent on Tuesday, the biggest percentage gain since June, as disappointing USA economic data reinforced speculation in the market that the Federal Reserve will not raise interest rates at its September policy meeting.
U.S. gold futures ended the session two per cent higher at $US1354.0.
“The disappointment in the nonfarm payrolls data has been translated into optimism for gold prices at the moment”. The metal rose 0.1 per cent on Monday.
The fact that gold did not move much despite disappointing United States non-farm payroll numbers reflects the extensive level of speculative position in the gold markets either through futures or exchange traded funds, said Dominic Schnider of UBS Wealth Management in Hong Kong.
Hedge funds and money managers reduced their bullish stance in COMEX gold contracts in the week to August 30 to the lowest in almost three months, US Commodity Futures Trading Commission (CFTC) data showed on Friday.
Asian shares edged up on Tuesday but were mostly in a holding pattern after Monday’s US holiday, as investors awaited a policy decision from the Reserve Bank of Australia.
Wall Street’s biggest banks are sticking to bets that the Fed will raise interest rates once this year, and the increase would most likely occur in December after a tepid employment report for August quashed most talk of a move as early as this month.
On technicals, analysts see strong support at US$1,315, a 23.6 per cent retracement of the August to September fall, with resistance at US$1,330. Losses intensified on Tuesday after the Institute for Supply Management reported that the USA services sector plunged to a more than six-year low in August.
New U.S. data releases and any comments from Federal Reserve officials will be watched closely for hints as to the timing of any rate increases.
“Longs (positions) have been suffering from price correction and would be quite hard for them to sustain when prices are volatile”.
The ICE U.S. Dollar Index DXY, -0.19% a measure of the greenback against a basket of six rival currencies, was down about 0.2%. The Wall Street Journal Dollar Index, which measures the USA currency against 16 others, was recently down 1.1% at 85.77.
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Spot silver touched a more than three-week high of $US20.13 an ounce.
