US MIDDAY: gold up 1.5 percent

September 07, 2013


Gold rose 1.5 percent on Friday after weaker-than-expected US nonfarm payrolls increased confusions over when the Federal Reserve will start paring back its massive bond-buying stimulus. Despite Friday’s rally, gold ended the week 0.5 percent lower for a second consecutive weekly loss as its safe-haven appeal dropped on a lack of progress about possible US military strikes against Syria.

Bullion jumped as much as $30 or 2 percent after data showed US employers hired fewer workers than expected in August and the jobless rate hit a 4-1/2 year low as Americans gave up the search for work. The disappointing report complicates the Fed’s decision on whether to scale back its monetary stimulus later this month, as the US central bank is set to deliver its next policy statement on September 18. “There is a lot of uncertainty with Syria and the Fed tapering. Those two forces are very much on most traders’ minds right now,” said Albert Ng, a market maker and portfolio manager at Aurum Options Strategies in New York.

US President Barack Obama resisted pressure on Friday to abandon plans for air strikes against Syria and enlisted the support of 10 fellow leaders for a “strong” response to a chemical weapons attack. Spot gold was up 1.5 percent to $1,387.46 an ounce by 2:43 pm EDT (1843 GMT). US Comex gold futures for December delivery settled up $13.50 at $1,386.50 an ounce, with volume about 10 percent below its 30-day average, preliminary Reuters data showed.

The worse-than-expected US jobs data suggests that tapering of the Fed’s $85 billion monthly bond-purchases, known as quantitative easing, could be pushed back further than had previously been expected, said Mitsui Precious Metals analyst David Jollie. The Fed should begin reducing monthly bond purchases at a meeting later this month in order to set monetary policy on a course for “gradual and predictable” normalisation, Kansas City Fed President Esther George, a top US central banker, said on Friday.

Monetary stimulus has been a major driver of gold’s rally of recent years, as the metal’s status as a hedge against inflation and economic uncertainty benefited from increased money printing by central banks in a low interest-rate environment. Gold rose to a record high of $1,920.30 on September 6, 2011 – exactly two years ago. Year-to-date, the metal is down 17 percent and may be set to break its streak of annual gains in the past 12 consecutive years. Among other precious metals, silver was up 2.8 percent at $23.80 an ounce. Platinum gained 0.9 percent to $1,491.74 an ounce, while palladium was up 1.3 percent at $693.71 an ounce. Courtesy Reuters

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