Gold rebounds after six-day losing streak on softer greenback
New York (Nov 6) Gold futures rose on Wednesday, potentially snapping a six-day losing run that saw its prices plunging to a three-week low as speculative traders created positions, betting on rising global demand. More importantly, the greenback eased, creating more space for the precious metal's growth.
The Institute of Supply Management's non-manufacturing index rose to 55.4 points in October, a surprisingly good result, ahead of closely watched macro figures to be released later in the weak. If the US economy surprizes and posts upbeat results, the chances of sooner-than-expected tapering will dramatically increase, most analysts suggested, with gold prices being especially vulnerable to such a prospect.
Gold contracts for December leaped 0.83% to $1,318.90 an ounce on New York's Comex as of the time of writing, followed by silver futures that jumped 1.45% to $21.950 an ounce.
The US dollar index, measuring the strength of the greenback versus a basket of six of its major peers, continued its path down from its recent highs, as it eased 0.14% to 80.589 points at the same time.
"Gold is still under pressure from relatively strong US dollar, but off worst levels of $1305 an once, with sideways around $1315 . Resistance is still strong from falling 8-month trendline at $1350 an ounce,"Mike van Dulken, Head of Research at Accendo Markets, commented this morning.
Crucial data ahead
Gold lost 22% this year so far amid speculation the Fed would scale back its $85 billion in monthly bond purchases as the world's number one economy started to pick up. Thus, the metal is poised to book first annual drop in twelve years.
Never-ending tapering speculations continued to busy global investors, as the US Federal Open Market Committee (FOMC) meeting scheduled for December 17-18 approaches.
The Bureau of Economic Analysis' first estimate of the third-quarter GDP growth rate is projected by most economists to show a 2% rise, down from 2.5% in the previous three months. The data will be released on Thursday. Adding to that, Friday will see the widely anticipated Labor Department's non-farm payrolls figure, which is expected to rise by 120,000 workers for the last month after a 148,000 gain in September.
Both readings are likely to be reflected in the Fed's decision. Stronger-than-expected readings may dramatically rekindle the likelihood of tapering, sending prices of precious metals lower. "“Given the recent string of better-than-expected US economic data, gold may test the $1,300 an ounce level ahead of the payrolls report,” James Steel, an analyst at HSBC Securities wrote in a note. “The path of least resistance for gold appears lower.”
