By Myra P. Saefong and Barbara Kollmeyer, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures climbed Wednesday, attracting investor interest after private-sector employment growth rose less than expected and as U.S. equities headed broadly lower.
The private-sector employment figures came two days ahead of key nonfarm payroll data from the U.S. government which are expected to provide clues on how soon the Federal Reserve will taper its bond-buying program.
Gold for August delivery GCQ3 +0.48% climbed $6.50, or 0.5%, to $1,403.70 an ounce on the Comex division of the New York Mercantile Exchange.
“Stocks down, gold up is becoming a pattern, and vice versa,” said Adrian Ash, head of research at BullionVault. And “courtesy of the poor ADP jobs report, dollar weakness is also supportive.”
“But all eyes remain on Friday’s official non-farms data,” he said. “Fed comments on reducing [quantitative easing] are just talk, unless the jobs market can really gain traction.”
Automatic Data Processing Inc. reported that the economy gained 135,000 jobs in May. But that fell short of expectations for a gain of 170,000 by a Dow Jones Newswires poll of economists.
Other data showed U.S. productivity reduced to 0.5% in the January to March period from a prior read of 0.7%, while the U.S. services industry accelerated a bit in May.
U.S. equities extended their losses into a second day on the back of those economic reports, luring some investors to the metals market.
Anticipation
Further weak jobs growth from all-important nonfarm payroll data later this week could further strengthen the case for the Fed to maintain its $85 billion-a-month bond-buying program. Read more on the tapering debate here.
The Fed’s quantitative easing program has helped support gold as it tends to pressure the dollar and can lead to inflation. Gold is often seen as a hedge against inflation.
Any disappointment with the employment May figures, “and the record-large speculative bear contracts in gold futures look vulnerable to rapid short-covering,” said Ash.
Gold’s gain on Wednesday following Tuesday’s loss of $14.70, or 1%, when a rise in the U.S. dollar DXY -0.24% curbed the dollar-denominated metal’s appeal. The greenback weakened Wednesday.
Investors on Tuesday also reacted to a decision by India’s central bank to extend gold import restrictions to designated agencies and trading houses in a bid to reduce the country’s current account deficit.
Ash, however, said traders have “already discounted any meaningful impact from India’s latest restrictions on gold imports. “
