Gold stays under pressure from strong US dollar, data

The spot gold price stayed under pressure during Asian trading hours on Thursday amid a strong US dollar and better-than-expected US economic data which has boosted the odds of a December US rate hike.

Spot gold was last at $1,265.80-1,266.15 per ounce, down $2.30 from Wednesday’s close. Trading ranged at $1,265.60-1,269.65 so far – the lower end of the range is a fresh three-month low.

The US dollar index continued to hold above 96 as the US continued to release stronger-than-expected economic data. The index was last at 96.19 on Thursday, up 0.04 percent from Wednesday’s close.

The US final services PMI for September came in at 52.3, above the 51.9 estimate. ISM non-manufacturing PMI over the same period stood at 57.1, besting the economic consensus of 53.1.

Factory orders month-over-month in August ticked up 0.2 percent, with speculation pegging the number at -0.4 percent.

The ADP non-farm employment change at 154,000 jobs was, however, below the forecast of 166,000. While the figure is seen as a preview to the official jobs report due later on Friday, expectations are still for the official number to reach 172,000, up from August’s reading of 151,000.

“In sum, the economy is improving into Q4, which should provide the FOMC confidence to raise rates in December,” ANZ Research said on Thursday morning.

Strong US economic data has recently increased market expectations of a US rate hike within this year. With no October meeting and a presidential election approaching, December is widely seen as the last possible time for the Fed to restart interest rate normalisation this year – market participants reckon there is a 60-percent chance of this happening, according to the CME Group FedWatch Tool.

In the short term, conditions remain challenging for gold and the bulls’ resilience will be tested, Andy Farida, an analyst at FastMarkets, said.

“The ideal scenario for them is for retracement to test key technical support levels. Once support has been established – ideally with improved and strong physical demand – it should be able to establish a sell-off floor and perhaps then attract some dip-buying,” he said.

After the psychological level of $1,300 was taken out on Monday, the next support level is seen at the 200-DMA of $1,258, according to FastMarkets’ research team.

In other commodities, the Brent crude oil spot price fell 0.15 percent to $51.52 per barrel, and the Texas light sweet crude oil spot price slipped 0.34 percent to $49.47 so far on Wednesday.

In equities, the Dow Jones Industrial Average rose 0.62 percent to close at 18,281.03 on Wednesday.

In other precious metals, silver was last at $17.71/17.73, down $0.055. Platinum rose $2 to $973/979, and palladium increased $2.50 to $674/683 recently on Thursday.

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