LONDON: Gold dropped to its lowest in more than two months yesterday as European shares rose and investors waited to see if US jobs data could put the Federal Reserve on track to raise interest rates. Spot gold was down 0.2 percent at $1,306.25 by 1202 GMT, having earlier touched its lowest since June 24 at $1,303.95. US gold futures fell $2 to $1,309.40. “Having heard the Fed last week saying that the US economy is doing well, an interest rate hike is back on the table and that is driving prices down, especially with the market expecting a good jobs data number tomorrow,” Natixis analyst Bernard Dahdah said.
“We expect a Fed interest rate hike in December.” An upbeat payrolls report would reinforce the view that a US rate increase is likely before the end of the year after Fed Chair Janet Yellen said on Friday that the case for higher rates was strengthening. On Wednesday Boston Fed President Eric Rosengren said the Fed should consider that quicker interest rate rises over time could stave off risks to the economy, while Chicago Fed President Charles Evans said he was increasingly convinced that US economic growth had slowed permanently.
Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding the non-yielding asset while boosting the dollar, in which it is priced. “Technicals show that gold and silver prices need some correction and will see some mild rebound. But Friday’s jobs data is going to be crucial,” said Jiang Shu, chief analyst at Shandong Gold Group. “If the jobs data is going to be good, gold will fall to $1,260-$1,270 levels as markets will hope for a rate hike in September.”
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, posted the first monthly dip for four months in August. They fell 1.27 percent to 943.23 tons on Wednesday and were down 1.6 percent for the month. In other precious metals, silver gained 0.1 percent at $18.63 an ounce while palldaium rose 0.2 percent to $670.75. Platinum was up 0.2 percent at $1,050, having touched an eight-week low of $1,043.20 on Wednesday. —Reuters