Gold weaker on low investor interest, signs of economic growth
New York (Jan 16) Gold edged lower on Thursday, as a rally in equity markets and increasing optimism over global economic growth dented its appeal as an alternative investment and made it vulnerable to further losses.
The metal, which had climbed early in the year on strong Chinese physical demand and a weak US jobs report on Friday, gave up gains after a series of strong US data.
Spot gold fell 0.3% to $1,237.40 an ounce by 11.08am GMT. It touched a one-month peak of $1,255 on Tuesday.
US gold futures for February delivery were down $1 to $1,237.20/oz.
"Gold rallied towards the $1,255 level but it failed to go through it because there is no investor interest, and there may be a push towards the $1,210/$1,200 area," MKS SA head of trading Afshin Nabavi said.
"I’m sure that with the current strength in the dollar and equities, any kind of macroeconomic data or event, including the FOMC (Federal open market committee) meeting at the end of the month, will be watched to see whether there can be a break through the current range."
The dollar steadied against a basket of currencies as a set of robust US data and upbeat earnings from Bank of America helped offset concern over a growth slowdown following December’s disappointing payroll numbers.
European equities hovered around multi-year peaks, while US Treasury yields were about 2.9%. As gold pays no interest, returns on US bonds are closely monitored by traders.
Markets are closely watching data to gauge whether the US Federal Reserve will have enough evidence of economic recovery to continue unwinding its bond-buying stimulus over 2014.
The Fed announced the first cut to its $85bn in monthly bond purchases in December, citing an improving economy.
"The Fed is unlikely to change the QE3 (third round of quantitative easing) tapering pace just yet," VTB Capital analyst Andrey Kryuchenkov said in a note.
"But market participants are still likely to be nervous over the FOMC’s forward interest rate guidance and a change of pace later in the year, should the macro numbers remain bullish (and especially for the labour sector)."
The next meeting of the FOMC is on January 28-29, while the next major US data figure is the US weekly jobless claims report, scheduled for release at 1.30pm GMT.
Supporting investor appetite for riskier assets such as equities, the Fed Reserve said in its Beige Book published late on Wednesday the US economy continued to grow at a moderate pace from late November to the end of 2013, with some regions of the country expecting a pick-up in growth.
In other precious metals, silver fell 0.8% to $19.98/oz.
Spot platinum fell 0.6% to $1,415.75/oz, while palladium was unchanged at $736.47/oz.
Platinum failed to react to data showing European car sales posted their highest year-on-year gain in four years in December.
Platinum is used in catalytic converters to clean exhaust emissions, most heavily in vehicles powered by diesel, the predominant vehicle fuel in Europe.
