Gold made modest gains on Monday morning but remains under pressure as safe-haven buying dissipates and the market switches back to focussing on the Federal Reserve.
The spot gold price was last at $1,241.70/1,242.50 per ounce, up $8.60 on the pre-weekend close and moving away from three-week lows of $1,228.20 hit in Friday.
The metal seems to have shrugged off a surprisingly positive US labour market on Friday, which has raised the possibility of an earlier interest-rate rise from the Fed.
Total non-farm payroll employment rose by 257,000 in January, which beat the 236,000 forecast, although the unemployment rate ticked slightly higher to 5.7 percent.
“In the weeks ahead gold is likely going to be caught between the crosscurrents of eurozone uncertainty and US economic data surprises feeding into Fed policy expectations,” UBS’ Edel Tully said.
The losses signal the fading effect of safe-haven buying triggered by uncertainty in Europe and stronger risk assets while speculation over an impending rate increase heats up.
“Last week represented a shift away from trading risk sentiment (safe-haven buying) back to pricing in Fed expectations once again, and we feel that this could have further downward implications for the metals in the short to medium term,” MKS said in a note.
Greece will be watched closely for any signs it is nearing an exit from the bloc should it fail to reach an agreement with international creditors on its debts.
Continued physical demand from China ahead of the Lunar New Year may offer some respite, although a sudden decrease in demand may incite further liquidation if China rapidly halts buying in the run-up to the holiday, MKS said.
The latest CFTC report shows the gold net long position fell 620,000 ounces to 22.19 million ounces, while gross longs were down 1.2 million ounces.
“Overall, the correction as of last Tuesday was modest relative to the build-up in long positions year-to-date. Net spec positioning at 67 percent of the record remains elevated, suggesting that gold is most at risk of a further washout among the four precious metals,” UBS’ Tully added.
The data calendar today is quiet, with just the German trade balance earlier at 21.8 billion euros beating the forecast 18.2 billion euros, while eurozone Sentix investor confidence at 12.4 was also better than expected.
The US labour market conditions index and a speech from Fed member Jerome Powell are due later.
Other metals also made gains, with silver up 37 cents at $17.04/17.09 per ounce, platinum $4 higher at $1,222/1,227 and palladium up $2 at $781/787.
The PGMs could be given a further boost after South African power producer Eskom said its grid remains vulnerable while several generating units are offline – technical faults are making it difficult to keep up with demand. Any interruptions to power supply may affect some of the region’s mining facilities.
(Editing by Mark Shaw)
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