LONDON - Gold was broadly steady on Friday, with investors parked mostly on the sidelines ahead of key U.S. employment data, seen as crucial to deciphering the need for further U.S. interest rate cuts.
Spot gold stood at $736.25/737.00 by 1007 GMT, marginally higher from $736.10/736.90 quoted in New York late on Thursday, when it hit a two-week low of $720.70.
“The market is just waiting for the payrolls figures. It would be really important for gold to close near $740 or above the level today and that would help the metal a lot next week,” said Michael Kempinski, senior metals trader at Commerzbank.
“Trust in the metal is definitely there. Maybe, we will see new highs in the afternoon. We couldn’t break through $750 yet, so that’s an obvious target,” he added.
The U.S. currency held above record lows versus the euro and a basket of major currencies as investors braced for September’s non-farm payrolls report, due at 1230 GMT, for clues on the need for more interest rate cuts.
Data in August -- showing the first monthly drop in hiring in four years -- were seen as a key trigger for the Federal Reserve’s 50 basis point rate cut last month.
A rate cut is often seen as a negative factor for the dollar, as it lowers the currency’s yield appeal. A weaker U.S. currency also makes dollar-priced gold cheaper for non-U.S. investors.
Next stop - $800?
“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 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 $2.0 an ounce at $741.70 from the New York settlement. On Monday, it hit a 28-year high of $755.70.
“Direction today will depend largely on the dollar’s reaction to the payrolls reading. However 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 $1,364/1,369 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 $13.41/13.46 an ounce from late New York’s $13.36/13.41.