Strengthening economic circumstances in the world's largest economy pulled down gold futures on Friday as the yellowish metal pushed toward its biggest weekly losses since June, according to Bloomberg.
Confidence is rising that the U.S. Federal Reserve is inclined to reduce monetary stimulus measures that have been implemented to spur the economy. Chairman Ben Bernanke with the Fed said last month that the body he leads is aiming to taper the measures in the coming months and discontinue it by the end of this year.
The precious metal endured a fourth-straight trading session of losses on Friday, representing its longest bearish trend since the end of June. The dollar index, a gauge of the greenback's strength against 10 major rivals, advanced to its top level in about 14 days on Friday. The dollar and bullion tend to perform the inverse of one-another.
The dollar benefited from unemployment insurance claims dropped to their lowest rate in five years while data indicated that the pace of manufacturing in the U.S. picked up. Anticipation is high for July job market data, which the U.S. Labor Department is slated to release Friday afternoon. Gross domestic product during the second quarter of this year climbed 1.7 percent in the U.S., pushing past forecasts of economists and analysts.
Thus far this year, gold futures have lost roughly 23 percent of their value, which puts in peril the annual gains streak that presently stands at 12 years. Whether the yellowish metal will reverse those gains and then advance within the next five months remains to be seen.
"Gold and silver suffered from the headwinds caused by better U.S. data that increased the likelihood of quantitative-easing tapering in September," states a Friday report penned by analyst William Adams with FastMarkets Ltd. in London, according to Bloomberg. "Now that prices have pulled back as far as they have we expect these lower prices to attract continued good physical demand and there is also potential for short-covering" as one possibility for wrapping up price drop bets.
At 9:11 a.m. on Friday, gold futures moderately rose 0.14 percent, a $1.79 gain to $1,311.99 per troy ounce.
July jobs data highly awaited
Reuters reports the jobs reports for last month is slated to be released shortly after noon on Friday, for which anticipations are high.
"If we get a surprise stronger number (from nonfarm payrolls) than the market currently expects, it will increase appetite for the dollar, selling pressure on bonds and buying of stocks and of course the combination of the three is really anti-gold," senior manager Ole Hansen with Saxo Bank told Reuters on Friday. "Obviously, a strong number would enhance the view of Fed tapering in September."
Traders told the news source that physical demand for gold has been on the rise though prices have endured measures of volatility.
Asian, European trading pinched
Kitco News reports trading in Asia and Europe was influenced by anticipation about the jobs report. As was the price of bullion. Gold futures dropped lower than the threshold price of $1,300 per troy ounce, which one trader took note of.
"During the Asian lunchtime, stops were triggered below $1,300," the European trader told Kitco News on Friday.
Stronger data is tending toward indicating that the Fed is preparing to drop – or at least taper – its monetary stimulus measures.
"There is a realization … that the U.S. economy is starting to pick up," metals analyst Robin Bhar with Societe Generale told Kitco News on Friday.
The metals analyst pointed to the strong GDP during the second quarter of this year. He also noted that the Institute for Supply Management index for manufacturing checked in at 55.4 last month after registering at 50.9 during the month prior.
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