Gold ticks lower after regaining losses from FOMC statement, jobs numbers
London (Aug 1) Precious metals edged lower in early European trading although most have regained the losses sustained in the run-up to the US Federal Open Market Committee statement.
Spot gold was last at $1,320.10/1,321.35 per ounce, down $4.35 on the previous session's close. Yesterday, however, the metal dipped to an eight-session low of $1,305.50 after US data came in better than expected.
"Precious metals went on a roller coaster ride," Commerzbank said. "Stops above the $1,330 level in gold triggered a move higher in Asian trading which didn’t last long as gold then dropped below $1,310 after better than expected ADP employment numbers and the Fed release before rallying above $1,330 again and then selling off in late New York trade."
According to Automatic Data Processing (ADP), private non-farm payrolls increased by 200,000 in July after gains of 198,000 in June - an upward revision from initial estimates of 188,000.
The better-than-expected number weighed on gold - the FOMC had previously indicated it will continue its quantitative easing programme as long as unemployment remains above 6.5 percent.
“Economic activity expanded at a modest pace during the first half of the year. Labour market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated,” the FOMC said on Wednesday following its two-day policy meeting.
“The housing sector has been strengthening, but mortgage rates have risen somewhat and fiscal policy is restraining economic growth. Partly reflecting transitory influences, inflation has been running below the committee's longer-run objective, but longer-term inflation expectations have remained stable,” it added.
The Fed remains committed to purchasing $85 billion in new debt per month in an open-ended programme (QE3). Accommodative measures from the US central bank are supportive of commodity prices because extra liquidity tends to debase the dollar and create future inflationary risks.
“The committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labour market has improved substantially in a context of price stability,” the FOMC said, repeating verbatim a section of its June policy statement.
In data released this morning, July China's manufacturing PMI came in at 50.3, above the forecast 49.8 and up from 50.1 in June. A number above 50 indicates an expansion. Spanish manufacturing contracted at 49.8 but that of Italy expanded, reading 50.4.
Later today, the weekly US unemployment claims will be closely watched. It is forecast at 346,000 and will be seen as a precursor to tomorrow's blockbuster non-farm payroll number.
In wider markets, the dollar gained some ground against the euro, climbing to 1.324. And in equities, the Nikkei ended up 2.5 percent and the Hang Seng about one percent.
In the rest of the complex, silver was down 27 cents at $19.56/19.61 per ounce, platinum slipped $5 to $1,433/1,438 and palladium was $2 lower at $725/730.
