Forexpros – Gold futures edged higher in holiday-thinned trade on Friday, as the release of disappointing nonfarm payrolls data revived expectations that the Federal Reserve could introduce fresh monetary easing measures to prop up the U.S. economy.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery settled at USD1,632.15 a troy ounce by close of trade on Friday. On the week, prices declined by 2.51%.
The precious metal fell to USD1,613.55 on Wednesday, the lowest since January 10 and below its 50-day moving average.
Gold futures were likely to find support at USD1,606.05 a troy ounce, the low from January 9 and resistance at USD1,685.25, the high from April 2.
Trading volumes were thin on Friday, as markets in London and floor trading on the Comex in New York remained closed in observance of Good Friday.
The Department of Labor said U.S. nonfarm payrolls rose by a meager 120,000 in March, the lowest since December and well below expectations for a 203,000 increase. It was the first time since November that hiring failed to top the 200,000 level, renewing concerns over the health of the U.S. economy.
The unemployment rate ticked down to 8.2%, the lowest since January 2009, from 8.3% in February. However, the data showed that the decline stemmed entirely from people dropping out of the labor force.
The weaker-than-expected jobs report revived expectations that the Federal Reserve may implement a third round of quantitative easing, which would weaken the dollar and drive gold prices higher.
Expectations of monetary stimulus tend to benefit gold, as the metal is seen as a safe store of value and inflation hedge.
Quantitative easing has been a key driver in gold’s bull run over the past two years, as it keeps interest rates and borrowing costs low, which makes gold more attractive compared with yield- or dividend-bearing assets such as bonds or stocks.
Prices came under heavy selling pressure earlier in the week, plunging more than 4% in the two sessions leading up to Thursday.
On Wednesday, futures fell to a three-month low after the minutes of the Fed’s March meeting indicated that policymakers will refrain from launching a third round of easing unless the rate of economic growth falters or inflation drops below the central bank’s 2% targeted rate.
That was the second time in a month that gold has sold off in response to signals from the Fed that more easing is not guaranteed.
Gold prices dropped almost 5% in the three sessions following March’s Fed meeting after the central bank gave an upbeat assessment of the U.S. economy, which reduced expectations for a third round of monetary easing in the U.S.
Prices rebounded Thursday as the sharp two-day drop created bargain buying opportunities for investors reluctant to bet that prices would fall further.
Meanwhile, gold traders continued to monitor developments surrounding a nationwide strike by bullion and jewelry dealers in India, which has crippled the nation’s gold industry over the past three weeks.
According to the All India Gems & Jewellery Trade Federation, gold dealers in the country returned to work over the weekend, opening shops on Saturday after remaining closed for 21 days.
The three-week strike came to an end after India’s Finance Minister Pranab Mukherjee pledged to reconsider newly imposed taxes on the precious metal.
“We and all our associated members have decided to call off the strike until May 11 and expect some favorable announcement by the finance minister in Parliament by then,” said Bachhraj Bamalway, chairman of the trade group, according to a Wall Street Journal report.
Most Indian jewelry and gold shops have remained closed since March 18 after the country announced a 4% import duty hike on gold and a 0.3% excise tax on most gold jewelry.
Prices could potentially receive a boost in the coming weeks as one of the nation’s largest Hindu gold-buying festivals of Akshaya Tritiya begins later in April. India is the world’s largest gold consumer.
Meanwhile, fears over the euro zone’s debt crisis were rekindled earlier in the week by a dismal bond auction in Spain, which triggered a spike in borrowing costs for the southern European nation.
The yield on the country’s 10-year bond climbed to 5.84% on Thursday, the highest level since mid-December.
There have been renewed concerns of further debt contagion in the euro zone in recent weeks amid fears over the fiscal health of the region’s fourth largest economy.
Elsewhere on the Comex, silver for May delivery settled at USD31.72 a troy ounce by close of trade on Friday, retreating 2.3% on the week. Meanwhile, copper for May delivery slumped 1.5% over the week to settle at USD3.797 a pound.
In the week ahead, investors will be eyeing a speech by Fed Chairman Ben Bernanke on Tuesday for any indications on what the future direction of monetary policy may be.
Meanwhile, China is set to release government data on consumer prices on April 9 and official statistics on the size of its economy on April 13.
In addition, market participants will be watching developments in the euro zone, amid ongoing concerns over the threat of contagion from Spain.
Forexpros
