News Column

US data put a brake on gold fall

August 5, 2014

LONDON: Gold prices steadied yesterday after a third successive weekly decline, supported by surprisingly weak US payrolls data, which dampened speculation the Federal Reserve would raise interest rates soon.

A run of forecast-beating data, including numbers pointing towards a recovering jobs market, had fuelled talk that the Fed could raise interest rates sooner than expected, increasing the opportunity cost of holding non-yielding gold.

That sent gold to a six-week low last week, but it recovered after a report on Friday showed US jobs growth slowed in July, allowing the Fed to keep rates lower for longer.

Gold was fixed at $1 290.50 an ounce in London yesterday afternoon, just 75c down from the second fix on Friday. It fell 1.1 percent last week for its first three-week decline since September last year.

"Momentum in gold remains negative, not least due to worries about how the metal is going to react to the expected change in the monetary outlook in the US," Saxo Bank analyst Ole Hansen said. "But at the same time, we are seeing bond yields falling again and stock markets have shown signs of weakness over the past week.

"This could potentially sway some investors back into gold, not from a safe haven perspective as recently seen, but more as an alternative investment," he said.

Investors welcomed news that Portugal prevented the collapse of one of its biggest banks, putting some life back into European stocks.

In the physical markets, buying remained subdued in the seasonally quiet northern summer, even as many consumers expected prices to decline.

Among other precious metals, platinum was fixed at $1 465 an ounce in London yesterday afternoon, up $3 from Friday but palladium shed $4 to fix at $867.

New car sales in Germany, Europe's largest vehicle market, bounced back in July, suggesting further improvement in second-half demand.

"The platinum group metals are an important component used in the fabrication of autocatalysts," HSBC said in a note. "Further strength in the automotive sector and, thus, platinum group metal demand is a supportive case for higher prices, in our view." - Reuters

Cape Argus

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Source: Cape Argus (South Africa)

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