Forexpros – Gold futures eased down on Friday, but remained close to the previous session’s six-week high as the safe haven appeal of the precious metal was underlined amid the uncertain outcome of Greece’s sovereign debt crisis.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery settled at USD1,755.95 a troy ounce by close of trade on Friday, climbing 0.46% over the week, the second consecutive weekly gain.
Gold’s losses Friday came as the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, rose 0.28% to trade at 77.12.
Gold prices often move inversely to the U.S. dollar, as gold becomes more expensive for buyers using other currencies.
The greenback was boosted after the U.S. Department of Labor said in a report that the unemployment rate fell unexpectedly to a six-month low of 9.0% in October, down from 9.1% in the previous month.
The data showed that nonfarm payrolls rose by 80,000 in October, falling short of expectations for a gain of 95,000, while the previous month’s figure was revised up to an increase of 158,000 from 103,000.
Prices remained supported as investors awaited a government confidence vote in Greece, amid growing internal opposition to Prime Minister George Papandreou’s handling of the country’s sovereign debt crisis.
Early Saturday morning, Papandreou’s government survived the vote after calling for a new government coalition to lead the debt-laden country.
Meanwhile, leaders of the Group of 20 industrialized nations meeting in Cannes on Friday failed to agree on a plan to enhance the euro zone’s response to its sovereign debt crisis.
The meeting did produce an agreement by Italian Prime Minister Silvio Berlusconi to allow the International Monetary Fund to monitor the country’s progress on cutting its deficit and implement economic reforms after Italian bond yields surged to fresh euro-era highs.
On Thursday, futures jumped nearly 1.5% to trade at the highest level since September 22 after the European Central Bank unexpectedly cut its benchmark interest rate to 1.25% from 1.50%, as the region’s escalating debt crisis overshadowed concerns over persistently high inflation.
Lower interest rates can give gold a lift, as it decreases the relative cost of holding on to the metal, which doesn’t offer investors any similar guaranteed payout.
Gold prices also found support after Federal Reserve Chairman Ben Bernanke said on Wednesday that an additional round of asset purchases, specifically mortgage-backed securities, was a “viable option” after the bank lowered its growth forecast for next year.
French lender Societe Generale said Friday that the ECB and the Fed’s use of monetary policy to support growth should weigh on both the euro and the dollar, while supporting gold as an alternative asset.
“As the ECB cuts and the Fed remains hyper-dovish, it captures our core foreign exchange view pretty simply,” the lender said in a report.
Elsewhere on the Comex, silver for December delivery settled at USD34.12 a troy ounce by close of trade on Friday, falling 3.2% on the week, while copper for December delivery settled at USD3.564 a pound, dropping 4.65% over the week.
In the week ahead, developments in Greece will remain in focus, as opposition parties are calling for early elections while George Papandreou is pushing for a cross-party government to implement the latest European aid package.
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