LONDON: Gold advanced yesterday, halting its longest losing streak in nearly six months, as the dollar fell on strengthening expectations that the US Federal Reserve will extend its monetary stimulus.
Fed policymaker John Williams said the central bank should wait for stronger evidence of growth before trimming its bond-buying programme, which helped balance out data on Tuesday showing a surprisingly strong US service sector.
The timing of any tapering of the Fed’s $85bn in monthly bond purchases has been a major factor driving gold prices this year. The metal has lost a fifth of its value so far on fears the Fed would start cutting back its stimulus.
Recent mixed economic data has cast doubts over the real strength of the US economy, leaving some in the market to speculate that the Fed could act before year-end.
Spot gold was up 0.5 percent at $1,317.11 an ounce by 1300 GMT. The metal had dropped three percent over the past seven sessions, and analysts still saw it as vulnerable to a break below the $1,300 mark if US data continues to show a pick-up in the economy.
Comex gold futures for December rose $8.60 to $1,316.70 an ounce.
Trading volumes have been low over the past few sessions, and investors are expected to remain cautious ahead of US non-farm payrolls report on Friday, which could give more clues on the state of the economy and the future of the Fed’s stimulus.
“The non-farm payrolls are coming on Friday, and tomorrow we have the ECB and the BoE meetings on interest rates,” MKS SA head of trading Afshin Nabavi said. “Markets are a little bit hesitant, waiting for some kind of direction ... gold seems to have found support at $1,306, while $1,321 is a good resistance level.”
The euro rose against the dollar as investors waited to find out what steps the European Central Bank (ECB) might signal at its policy meeting on Thursday.
“The ECB is expected to keep rates on hold, but the relative dollar strength against the single currency is still important to keep an eye on as far as bullion is concerned,” VTB Capital said in a note.
