Gold firm as soft U.S. data offsets euro weakness
London (Sept 4) Gold was firm above $1,270 an ounce on Thursday as the negative impact from a weaker euro and surging global shares after the European Central Bank cut interest rates to record lows was counteracted by lower than expected U.S. jobs data.
The ECB cut its main refinancing rate to 0.05 percent from 0.15 percent and lowered the rate on bank overnight deposits to -0.20 percent.
Data showed U.S. companies hired 204,000 workers in August, below analyst projections and the level set in July.
"The big news is clearly the ECB ... logically, if the dollar is strong versus the euro, that impinges on gold but on the other hand there is some buying into that economic uncertainty," Mitsubishi Corp analyst Jonathan Butler said.
"It is also emerging that although the U.S. is recovering fairly well, it is perhaps not as well as some had imagined," he added. "So these two things together seem to be giving gold some fair balance around $1,270."
Spot gold rose 0.5 percent to $1,275.49 an ounce by 1326 GMT, having touched a session low of $1,266.70 after the ECB rate cut announcement. The metal hit its weakest since mid-June at $1,261.19 on Wednesday on news of a ceasefire plan in Eastern Ukraine, before staging a mild recovery.
U.S. gold futures rose $4.60 an ounce to $1,274.80.
Global equities rose and the euro fell sharply versus the dollar after the ECB rate move, which lifted gold priced in euros by one percent to 973 euros an ounce.
The ECB is under strong pressure to tackle stubbornly low inflation at a time when the conflict in Ukraine threatens to destabilise the region's fragile recovery.
Gold, seen as an insurance against risk during times of political and financial uncertainties, has gained more than 5 percent so far this year, with tensions in Ukraine and violence in the Middle East.
U.S. nonfarm payrolls data due on Friday is expected to give further clues about the world's largest economy and the timing of the Federal Reserve's move to raise interest rates.
Higher interest rates would hurt the attractiveness of non-interest-bearing assets such as gold.
"My expectation is that there will be a good jobs number tomorrow after above-consensus data this week, so the dollar could rally again and gold could fall to the $1,240-$1,260 area," Societe Generale analyst Robin Bhar said.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund and a good measure of investor sentiment, fell 2.69 tonnes to 790.51 tonnes on Wednesday.
Among other precious metals, platinum rose 0.4 percent to $1,407.75 an ounce, and palladium gained 1.1 percent to $879.90 an ounce. The metals, used in auto manufacturing, were lifted as U.S. auto sales reached their highest August level in more than a decade.
Spot silver rose 0.3 percent to $19.19 an ounce, recovering from a 2-1/2 month low of $19.03.
Source: Reuters
