Gold checked by strong US dollar, awaits US jobs report

The spot gold price inched higher but stayed check by a strengthening US dollar during Asian trading hours on Friday, October 7 amid the wait for the US payrolls report later in the day.

Spot gold was last at $1,257.35-1,257.75 per ounce, up $1.95 from Thursday’s close. Trading ranged at $1,250.40-1,259.55 so far on Friday after the yellow metal fell to a four-month low of $1,249.95 on Thursday.

The US dollar index surged to as high as 97.47 on Friday – the highest since July 27. It was last at 96.92, up 0.23 percent from the previous day’s close.

The US dollar has gained strength following recent improved US economic data which lifted the odds of a December US rate hike.

On Thursday, US weekly unemployment claims during September 22-29 came in at 249,000, below the forecast of 255,000. This number, which is second-lowest level since 1973, suggests that the US labour market remains strong.

In addition, US Challenger job cuts year-over-year in September came in at -24.7 percent, besting expectations of -21.8 percent.

The market now awaits the US official payrolls report due later today, where forecast is for 171,000 jobs to have been added in September, up from 151,000 in August.

“When some senior members of the FOMC still appear to be looking for excuses not to hike rather than the opposite, a result close to market expectations will be needed to keep expectations for a hike by December and the recent US dollar bullishness on track,” ANZ Research said on Friday.

Market participants currently see a 64-percent chance of a US rate hike in December, up from odds of 60 percent a day ago, according to the CME Group FedWatch tool.

The recent dip in gold prices is likely to spur demand from consumers and investors as many have been waiting for a price pullback before entering the market, the World Gold Council said in a report on Wednesday.

“Low and negative interest rates, coupled with continuing political, economic and policy uncertainty… are generally positive for gold,” the WGC said.

Price weakness should revive buying interest, William Adams, head of research at FastMarkets, agreed. But the key will be to see how much long liquidation there has been or whether the longs remain committed, given that the driver for the latest price weakness being short selling, he said.

“With the US election less than a month away and a US rate rise also likely in the fourth quarter, the market has a lot to think about. We feel investors will continue to want safe-haven cover in the months ahead so we expect this dip to be short-lived,” he added.

In other commodities, the Brent crude oil spot price fell 0.19 percent to $52.47, and the Texas light sweet crude oil spot price slipped 0.2 percent to $50.42 so far on Friday.

In equities, the Dow Jones Industrial Average fell 0.07 percent to close at 18,268.50 on Thursday.

In other precious metals, silver was last at $17.345/17.365, down $0.02. Platinum rose $4.50 to $966/971, and palladium increased $3 to $664/672 recently on Friday.

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