Gold struggles for direction on economic cues
Chicago (Jan 9) Gold prices struggled for direction on Thursday as investors looked to data on the economy for cues on the precious metal’s outlook.
Gold for February delivery was down $1.70, or 0.1%, to $1,223.80 an ounce on the Comex division of the New York Mercantile Exchange after touching a high above $1,230. March silver shed 12 cents, or 0.6%, to $19.42 an ounce.
Initial jobless claims for the week ended Jan. 4 dropped by 15,000 to 330,000, a five-week low, according to data released Thursday. Upbeat economic data tends to dull gold’s appeal as a safe-haven investment.
Traders await Friday’s nonfarm payrolls data for the latest monthly view on the employment situation. Naeem Aslam, chief market analyst at AvaTrade expects the report to be strong “and this could trigger a sell off for gold,” as aggressive tapering of the Federal Reserve’s bond-buying program “could be hitting the tapes earlier than expected.”
Minutes from the December Fed meeting released Wednesday showed central-bank officials were in broad agreement over last month’s decision to start reducing the asset-purchase program, as most believed the policy was losing its punch.
In a recent interview with Time Magazine, New Federal Reserve Chief Janet Yellen said she sees stronger economic growth this year.
His comments imply that “gold may not find favor among short-term investors to medium-term investors as a strong U.S. economy will result in investors remaining invested in equity markets and will use [the] rise in gold prices to exit their gold investment,” said Chintan Karnani, chief market analyst at Insignia Consultants.
BofA cuts gold-price forecast
Bank of America Merrill Lynch on Thursday chopped its gold price forecast by 11%, now expecting $1,150 an ounce in 2014 on concerns about a lack of buyer interest.
““If investors stopped selling gold, prices could stabilize around $1,200/oz. Yet, this is not our base case and a more likely scenario is for investors to continue reducing their exposure. Our models suggest that this could take prices down to $1,000/oz,” said Michael Widmer, a strategist at Bank of America Merrill Lynch, in the research note.
The bank also lowered its outlook for silver by 21% to $18.38 an ounce. In November, it had predicted $1,294 an ounce for gold and $26.38 an ounce for silver in 2014.
The European central bank meeting Thursday did not have any surprises for the market. Accommodative monetary policy will continued to be pursued by European central bank for a large part of the year.
In Frankfurt, European Central Bank President Mario Draghi discussed the region’s low inflation in a dovish press conference following the bank’s decision to hold interest rates steady. The euro swung to a slight loss against the dollar in recent trade.
On Wednesday, gold futures settled lower for a third consecutive session as data showed that the private sector in December added the most jobs in more than a year, which helped buoy the U.S. dollar.
Elsewhere in metals trading, platinum for April delivery added $1.60, or 0.1%, to $1,415.80 an ounce, while March palladium inched down 45 cents to $737.85.
