US manufacturing data outstrips soft euro-zone number, while US economy adds fewer jobs that expected in April
LONDON — Gold prices fell on Wednesday along with the euro as US factory orders data helped the dollar extend early gains and as speculation faded that the Federal Reserve is set for another round of monetary easing.
Comments from several Fed officials on Tuesday reinforced the notion that the bank is happy to stand pat on policy. Talk of further easing, which could hurt the dollar and keep interest rates low, has added significant support to gold this year.
Spot gold was down 0,8% at $1648,15 an ounce at 2.01pm GMT, while US gold futures for June delivery were down $13,50 an ounce at $1648,90.
The metal briefly came off lows after a report showed US private employers added the fewest jobs to the economy since September 2011 in April, denting the dollar’s gains. The data is seen as an important precursor to a major jobs report on Friday.
"ADP private sector employment (data) in the US (are) usually seen as a good proxy to non-farm payrolls on Friday," VTB Capital analyst Andrey Kryuchenkov said. A weak payrolls report could reignite talk about more monetary stimulus, weighing on the dollar, he said.
A spate of more positive readings on the US economy recently has cut speculation the country will extend quantitative easing to stimulate growth, which helped lift gold prices earlier in the year.
BNP Paribas cited waning expectations that quantitative easing is imminent in cutting its gold and silver forecasts for this year, by $140 to $1715 an ounce and by $4,40 to $33,10 an ounce, respectively.
"(Our economists’) central scenario is now for further Fed monetary accommodation to be implemented only in the fourth quarter instead of June," it said. "This change has significant implications for our gold price forecasts (and by extension for our silver price forecasts), given gold’s tight positive relation with the level of market liquidity."
PHYSICAL DEMAND SOFT
Gold prices have been held in check in the past month by a dearth of physical demand, with buyers in key jewellery consumer India deterred by high prices and a weak rupee, exchange traded funds reporting outflows and coin sales easing.
Some appetite returned for gold coins in May, with the US Mint reporting sales of 10000 ounces on the first day of the month, half the total sold in the whole of April. That was its worst month for gold coin sales since June 2008.
Holdings of gold-backed, exchange traded funds monitored by Reuters, which issue securities backed by physical gold and proved a popular investment during the financial crisis, fell by 194000 ounces in April and edged below 70-million ounces on Tuesday for the first time since February 2.
"As much as the remarkable resilience of gold ETF investment is testament to the ongoing positive sentiment among longer-term players, in our view there’s no doubt that the buying has dried up," UBS said in a note on Wednesday.
"In the current lacklustre environment, the market needs more than just resilience. Significant ETF buying will have to resume in order to breathe some life back into gold," it added. "Absent that resuscitating factor, we think gold is likely to continue its aimless wander."
Silver was down 1,4% at $30,50 an ounce. Its underperformance lifted the gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, to three-and-a-half-month highs.
Spot platinum was down 0,6% at $1557,69 an ounce, while palladium was down 1,2% at $667,47.
