Gold ticks up, but holds near 11-week low on US rate outlook

08 Jun, 2015 11:50 am

SINGAPORE – Gold ticked up on Monday after a three-day losing streak, but was still hovering near an 11-week low as a strong U.S. jobs report boosted expectations for a U.S. interest rate hike in September.

Spot gold inched up 0.2 percent to $1,173.90 an ounce by 0307 GMT.

The metal had fallen to $1,162.35 on Friday, its lowest since March 19, after data showed U.S. job growth accelerated sharply in May and wages picked up. Nonfarm payrolls increased 280,000 last month, the largest gain since December.

The report, indicating signs of strong momentum in the U.S. economy, bolstered expectations the Federal Reserve will begin to raise rates in September and sent the dollar rallying to a 13-year peak against the yen.

“The technicals of the markets have deteriorated to such an extent that they will now likely drive precious prices lower, as the theme of a stronger dollar and the imminent rise in U.S. rates again dominates sentiment,” said INTL FCStone analyst Edward Meir.

Higher U.S. rates could diminish demand for non-interest-paying bullion, while a stronger dollar makes gold more expensive for holders of other currencies and reduces the metal’s safe-haven appeal.

Investor positioning in bullion continued to reflect bearish sentiment.

Further outflows were seen in SPDR Gold Trust, the world’s top gold-backed exchange-traded fund, with holdings dropping 0.17 percent to 708.70 tonnes on Friday, the lowest since mid January.

Hedge funds and money managers cut net long positions in gold and silver during the week ended June 2, U.S. Commodity Futures Trading Commission data showed on Friday.

“Gold ETF holdings are near their 2015 lows and seem to be contributing to gold’s gradual decline since mid-May,” said MKS Group trader James Gardiner. “Higher bond yields and a stronger dollar are also continuing to put pressure on the metal.”

Benchmark 10-year U.S. Treasury yields posted their steepest weekly jump in nearly two years on Friday after the jobs report.

The next major support level for gold is around the March low of $1,142, although there are also signs of strong support in the mid-to-low 60s, he said.

In mining news, South Africa’s Association of Mineworkers and Construction Union said on Sunday it will launch a wildcat strike if its rival union and gold mining companies impose a wage deal on its members.

Strikes could potentially lower production levels and lend support to prices. – Reuters

Must Watch