Gold price softens, choppy trading expected
London (Sept 9) Gold prices were lower on Monday morning in European trading after Friday’s rally ran out of steam due to a lack of follow-through buying.
Spot gold slipped to $1,386.90/1,387.70 per ounce, down $3.85 on Friday’s close.
“Normal service has been resumed and a quiet session has seen prices either side of unchanged,” David Govett at Marex said.
“We remain in the same ranges we have seen for the last few weeks and we also remain bound by the same two overriding concerns: Syria, which provides support to the markets, and then QE tapering, which gives us a ceiling above,” he added.
On Friday, the yellow metal shot to a high of $1,393.65 following the release of a mixed US jobs report, which showed that 169,000 jobs were added in August, fewer than the 178,000 that had been expected. July's figure was also revised sharply lower to 104,000 from 162,000.
The unemployment rate fell to 7.3 percent, down 0.1 percentage points from the previous month. Still, the decline reflected a drop in the participation rate rather than an increase in employment levels.
The weaker-than-expected jobs report raises the likelihood that the US Federal Reserve will maintain its quantitative easing programme at the current pace of $85 billion per month, although Barclays Capital expects some form of tapering as early as this month.
“Although the weaker-than-expected non-farm payrolls data provided a boost to prices, our economists believe the report was sufficient to green-light a tapering of Fed asset purchases this month,” it said in a note.
The Federal Open Market Committee (FOMC) meets next week, where the tapering of QE is likely to be the main topic of debate. Accommodative measures from the US central bank are supportive of gold because extra liquidity tends to debase the dollar and create future inflationary risks.
“Combined with the debt ceiling debate and our in-house view for the dollar and Treasuries to strengthen further, prices are likely to face downside risk in the near term,” BarCap added.
Congress returns to Washington on Monday after a short break, with the end of the fiscal year looming at the end of the month. More pressing than the need to agree a funding bill is a resolution on whether to instigate military action against Syria.
Trading is likely to be jumpy in thin conditions today given a lack of frontline data and developments in the geopolitical sphere, with investors set to remain on the sidelines until the FOMC meeting for further clarity.
“Price action is likely to remain choppy within the recent trading range up ahead, with limited appetite to hold large positions,” UBS said in a note.
In the other metals, platinum was last unchanged at $1,488/1,499 per ounce, palladium at $694/700 was also unchanged, while silver at $23.76/23.80 was down slightly from Friday’s $23.82.
