Gold bounces toward $740, tracks dollar after data

Atul Prakash, Reuters
Published: Friday, October 05, 2007

LONDON, Oct 5 (Reuters) — Gold bounced on Friday in choppy activity, moving lock-step with the dollar, as investors brushed aside robust U. S. employment data and bet the world’s biggest economy was still on a slowing path.

Spot gold hit an intraday high of $739.30, closing in 28-year peaks hit earlier this week, before paring gains to $738.40/739.10 by 1430 GMT, from $736.10/736.90 in New York late on Thursday, when it hit a two-week low of $720.70.

U. S. non-farm payrolls grew by a solid 110,000 last month, causing a knee-jerk rise in the dollar. But the U. S. currency later fell as dealers bet the U. S. economy was still slowing, boosting gold’s safe-haven appeal.

«Over the medium term dollar is likely to weaken,» said Matthew Turner, metals analyst at Virtual Metals.

«The jobs data is quite erratic and it doesn’t mean that the next data would be as positive. Gold is likely to strengthen over the medium term on a weaker dollar and strong physical demand,» he said.

NEXT STOP — $800?

With markets looking for further dollar weakness and speculating on the possibility of further U. S. rate cuts after last month’s 50 basis point easing, analysts saw more scope for gains in gold.

«The markets expect another rate cut from the Federal Reserve and will be disappointed if it doesn’t materialise. Such a cut could well remove the final obstacle to gold (rising to) $800/oz by the end of the year,» Fortis Bank said in a report.

In other markets, the August 2008 gold contract in Tokyo <0#JAU:> ended 35 yen per gram higher at 2,783 yen after falling to its lowest in a week at 2,736 yen on Thursday.

U. S. gold futures fell, with the most active December contract down $0.7 an ounce at $743.10 from the New York settlement. On Monday, it hit a 28-year high of $755.70.

«Overall sentiment is still quite firm, with investor money continuing to flow into the market through the ETF’s,» said James Moore, analyst at TheBullionDesk. com.

Bullion used to back New York’s StreetTRACKS Gold Shares , the most popular gold exchange-traded fund, was at 577.85 tonnes on Thursday, just below this week’s record high of 578.03 tonnes. .

Spot gold rallied to a 28-year high of $747.65 on Monday before a rebound in the dollar sparked selling from investors.

The physical sector in Singapore saw some selling from holders who had bought gold on a price dip this week, but overall trading was muted ahead of the payroll data.

«Some people think $740 will be a strong resistance, so they are taking the opportunity to cash in. There’s light selling from Indonesia but the big boys won’t do much today,» said a dealer in Singapore.

In other metals, platinum rose to $1,370/1,374 an ounce from $1,359.50/1,366.50 in New York. It rose to $1,391 this week, within sight of last year’s record high of $1,395.

Palladium gained $2 to $367/371 an ounce, while silver edged up to $13.421/13.47 an ounce from late New York’s $13.36/13.41. (Additional reporting by Lewa Pardomuan in Singapore)