LONDON — Gold firmed on Thursday as the dollar fell to a seven-week low against a basket of currencies, but doubts over when the Federal Reserve will begin scaling back its monetary stimulus programme kept the metal in a narrow range.
The dollar index slid to its lowest since mid-June on Thursday on uncertainty over Fed policy. Trading conditions are quiet ahead of weekly US jobless data, due at 2.30pm South African time, analysts said.
Spot gold was up 0.2% at $1,289.61 an ounce at 1.26pm South African time, while US gold futures for December delivery were up $3.10 an ounce at $1,288.40.
"You are getting some smallish moves on the back of (the dollar), but the main driver is Fed policy, which is tied heavily into the employment rate," David Govett, head of precious metals at Marex Spectron, said. "As such, everybody’s waiting for these initial jobless claims figures today."
Fed monetary stimulus measures, known as quantitative easing, were a key factor in driving gold prices to record highs in 2011, as they kept long-term interest rates at rock bottom while stoking fears over inflation.
Speculation that the Fed may be set to taper quantitative easing has helped push gold prices down by nearly a quarter in 2013.
The president of the Cleveland Fed, Sandra Pianalto, seen as a centrist on policy, said on Wednesday that the US central bank could soon curb the pace of its bond-buying stimulus if recent improvement in the job market persists.
"The bullion market’s lack of a reaction to Ms Pianalto’s comments may indicate the degree of quantitative easing ‘tapering’ expectations already built into the gold price," HSBC said in a note.
"An announcement by the Fed later in the year to withdraw quantitative easing would be seen as less of a surprise for the gold market."
Exchange traded funds’ outflows persist
The world’s biggest gold-backed exchange-traded fund, New York’s SPDR Gold Shares, said its holdings fell by another 4.5-tonnes on Wednesday, bringing its total outflow for the week to 8.1-tonnes.
Demand from China, which is poised to take over from India as the world’s biggest gold consumer in 2013, has grown after bullion’s recent correction, analysts say.
"Physical demand remains good, with China importing more than 100-tonnes of gold in June — but this has not been enough to offset financial selling recently," ANZ said in a note.
Among other precious metals, silver was up 0.7% at $19.69 an ounce. Spot platinum was up 0.6% at $1,443.74 an ounce, while spot palladium was up 0.9% at $727.22 an ounce.
The premium of platinum, used in auto catalysts, over gold hit a two-year high of $157 an ounce on Thursday as the white metal outperformed.
The metal has suffered in recent years from weak demand from European car makers, but prices have been supported by threats to supply from South Africa and the launch of a new platinum exchange traded fund in Johannesburg, which added more than half a million ounces of metal to its holdings in less than three months.
Statistics South Africa said on Thursday that the republic’s platinum group metals output fell 18.9% in June, while its gold output fell 14.1%.
