The gold price rose on Monday as the negative impact of a stronger dollar was more than offset by fresh buying from the investment and physical communities.
Gold for February delivery on the Comex division of the New York Mercantile Exchange was last up $7.20 at $1,197.70 per ounce. Trade has ranged from $1,187.30 to $1,198.70.
The dollar remains near a two-year high at 1.2275 against the euro, while Germany’s DAX and France’s CAC-40 were down 0.48 percent and 0.85 percent respectively. The strength in the greenback comes after after the US reported 321,000 new non-farm jobs were created in November, the largest gain since January 2012 and 90,000 above forecast.
“The bears have had their noses bloodied over the last couple of weeks and the appetite for shorting gold as it falls is very much out of favour,” Govett said. “Prices finished lower [on Friday], but overall given the scale of the [US non-farm payroll] number, the market held pretty well.”
Meanwhile, Comex money managers last week increased their net long positions in gold by 26 percent to 68,600 contracts, constituting the highest figure in 14 weeks as well as the third weekly increase in a row.
“In other words, this group of investors has contributed to the rising gold price in recent weeks,” Commerzbank noted.
The market appears to be benefitting from improving fundamentals, continual reductions in short-covering and uneasy worldwide economic conditions, particularly in Asia. India’s removal of the 80:20 rule on gold imports has also provided a prop to prices, Barclays said in a note.
“Gold has significant headwinds to overcome in the form of a stronger dollar and the prospect of rate hikes, but the floor for prices has firmed somewhat following India’s announcement that it would lift its trade restrictions,” the bank added.
Nevertheless, INTL FCStone’s Ed Meir suspects that gold will likely be at its most vulnerable over next three to six months, which is the Federal Reserve should raise interest rates, leading to dollar to push higher.
“In addition, the recent rout in energy prices will lower inflationary expectations and increase real interest rates, yet another reason that we would be cautious about gold’s upside potential,” said Meir, who expects gold to fluctuate within a $1,000-$1,350 band, with a likely average of $1,130.
Oil prices again headed south this morning, with light sweet crude (WTI) oil futures falling $1.41, or 2.13 percent, to $64.41 per barrel.
In data today, the Chinese trade surplus widened to $54.47 billion in November from $45.41 billion in October and was above the forecast $44.3 billion.
But growth in exports of just 4.7 percent – below the expected 8.2 percent – will exacerbate fears of a sharper economic slowdown in the region, boosting expectations of additional stimulus measures.
In other data, Japan’s economy watchers sentiment at 41.5 disappointed, while final GDP at -0.5 percent was worse than the expected -0.1 percent. EU Sentix investor confidence at -2.5 beat the forecast -9.9 while German industrial production was as expected at 0.2 percent.
As for the other precious metals, Comex silver for March delivery was last down 0.8 cents at $16.250 per ounce. Trade ranged from $16.165 to $16.385.
Platinum for January delivery on the Nymex was up $12.60 at $1,232.10 an ounce, while the most-actively traded palladium contract was at $805.10 per ounce, up $2.40.
(Additional reporting by Ian Walker)
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