Gold falls to three-month low on strong dollar
London (Sept 8) Gold dropped to a three-month low on Monday as the dollar recovered losses made after a disappointing U.S. jobs report eased concerns about an early interest rate increase, while investors kept a close eye on the ceasefire in Ukraine.
Spot gold fell as much as 0.9 percent to its lowest since June 11, at $1,256.60 in earlier trade, and was down 0.8 percent at $1,258.05 an ounce by 1429 GMT. The metal had gained support on Friday from data showing that employers in the United States hired the fewest number of workers in eight months in August.
U.S. gold futures fell $9 an ounce to $1,258.20.
"It's the stronger dollar driving the price, but although Friday's non-farm payrolls took the market by surprise, gold managed to close only around $1,271," MKS SA head of trading Afshin Nabavi said. "There's a good possibility that we will see prices test the lower-$1,250 area."
The jobs market is seen as a leading indicator of the Federal Reserve's rates policy in the coming months, with its bond purchases expected to end in October.
Gold has benefited from low interest rates in the years after the credit crisis because investors were encouraged to put money into the non-interest-bearing assets.
"The weaker jobs report did not wobble the dollar significanty ... fianancial players and investors in the West stopped buying into gold some time ago and it's still difficult to see them get back into the market when you have much better returns elsewhere," VTB Capital analyst Andrey Kryuchenkov said.
The dollar rose 0.3 percent against a basket of leading currencies, while European equities dropped after an opinion poll showed for the first time this year that Scots may vote for independence next week in a referendum that could herald the break-up of the United Kingdom. Wall Street also opened lower after five straight weeks of gains.
Traders said developments in Ukraine were being watched to see if the ceasefire agreed with the pro-Russian rebels would hold.
Any worsening of the crisis, which has caused the sharpest confrontation between Russia and the West since the Cold War, could boost gold because the metal is seen as an insurance policy during times of political and financial uncertainty.
For now, the strength in the dollar is seen souring demand for bullion. Hedge funds and money managers decreased their bullish futures and option bets in gold for a third consecutive week to the lowest since June, the Commodity Futures Trading Commission said on Friday.
Physical demand picked up last week as gold fell to a near three-month low, but volumes were thin because markets in China, the top buyer of bullion, were closed for a holiday.
Platinum fell 0.3 percent to $1,399.00 an ounce and palladium dropped 0.5 percent to $879.50 an ounce.
Spot silver eased 0.5 percent to $19.03 an ounce.
Source: Reuters
