Gold rebounds on US payrolls but posts weekly loss
New York/ London: Gold rose on Friday following a sharp rebound from earlier lows, after mixed signals from the US nonfarm payrolls report suggested that the Federal Reserve could be more cautious about drawing down its economic stimulus program.
Bullion still posted a near 2 percent loss for its biggest weekly drop in five weeks, weighed down by a dollar rally.
Gold initially fell to a two-week low at USD 1,280 an ounce as encouraging US gross domestic product and factory activity data earlier in the week reduced the metal's appeal as an investment hedge.
It jumped about USD 30 or 2 percent from its session low after government data showed US employers slowed their pace of hiring in July but the jobless rate fell anyway, easing fears that the US central bank might imminently reduce its USD 85 billion monthly bond buyback stimulus.
The jobs data sparked a sharp decline in US Treasury bond yields, seen as measures of short-term interest rates.
"Gold seems to be more sensitive to signs of tapering than any other assets. Certainly, the direction of interest rate is a very crucial thing for gold at this point," said Bill O'Neill, partner of commodities investment firm LOGIC Advisors.
Spot gold was up 0.l percent at USD 1,309.80 an ounce by 2:31 p.m. EDT (1831 GMT), having earlier traded as low as USD 1,282.89.
Bullion posted a 1.8 percent weekly decline for its first weekly drop in four weeks.
US gold futures for December delivery settled down 70 cents at USD 1,310.50 an ounce, with trading volume about 10 percent below its 30-day average, preliminary Reuters data showed.
Gold staged a strong recovery as the dollar slumped against the euro and the yen, and benchmark US Treasury yields fell back below 2.7 percent.
Until Friday, the metal had ended lower in the last four days. Earlier in the week, the Fed offered no indication that it was preparing to reduce its monetary stimulus at its next policy meeting in September.
CHART RESISTANCE, ETF HOLDINGS DOWN
On chart, gold is likely to running into strong technical resistance at USD 1,320 an ounce near its 50-day average, analysts said.
Mark Arbeter, chief technical strategist at S&P Capital IQ, said that there could be a small pullback before a rally to over USD 1,450 an ounce, citing favourable futures positioning by speculators and overly bearish sentiment.
As a gauge of investor interest, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.7 percent to 921.05 tonnes on Thursday, hitting fresh four-year lows.
Outflows from the top eight gold ETFs tracked by Reuters have totalled 19 million ounces so far this year, or about USD 25 billion at current prices.
Among other precious metals, silver rose 1.4 percent to USD 19.86 an ounce. Platinum was up 0.4 percent at USD 1,441.99 an ounce and palladium eased 0.5 percent to USD 727.72 an ounce.