Gold recovers, but still set for worst week in six months
Gold bounced on Friday after two days of hefty losses, tracking a recovery in oil, but stayed on track for its biggest weekly loss in six months as euro zone political risk receded and a June increase to US interest rates looked increasingly likely.
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Spot gold rose 0.6 per cent to US$1 234.55 an ounce by 0940 GMT, while US gold futures for June delivery were up US$6.20 at US$1 234.80. The price, however, is still set to end the week down 2.6 per cent, the biggest weekly decline since November.
The metal hit a six-week low of US$1 225.25 on Thursday after the US Federal Reserve played down any threats to this year’s planned rate increases, supporting forecasts of another move in June.
Concerns over a victory by far-right candidate Marine Le Pen in French elections this weekend, which drove gold sharply last month, have faded considerably. Sunday’s vote is expected to elect market-favoured centrist Emmanuel Macron as president.
“Following six weeks of fund buying, gold was left exposed as geo-risks faded, but the fact that ETPs have seen limited selling appetite could be an indication that this was mostly speculative sellers reducing longs,” said Saxo Bank’s head of commodities research, Ole Hansen.
Holdings of gold exchange-traded products tracked by Reuters have held fairly steady during the recent sell-off, currently standing less than 1% below April’s near-five-month high.
“Risk of further weakness exist, exist, but at this stage the direction is likely to be determined by other commodities, especially oil,” Hansen said. “Some nervousness also persists ahead of today’s jobs report.”
The dollar index held steady ahead of the closely watched payrolls report due at 1330 GMT. The markets are awaiting clues on the strength of the labour market to help to gauge the Federal Reserve’s rate trajectory to the end of the year.
“The US labour market is expected to have recorded a rebound to 190 000 from a relatively weak March number of 98 000,” SP Angel said in a note. A strong report would shore up expectations of action from the Fed.
Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
Silver was up 1.1 per cent at US$16.46 after hitting a four-month low of US$16.17 on Thursday. The metal has fallen 10 per cent in the second quarter.
Platinum was up 1.6 per cent at US$913.44 an ounce, while palladium rose 0.4 per cent to US$806.88. The spread between platinum and palladium was close to its narrowest in 15 years, having dipped below US$100 an ounce this week.