Gold prices traded within in a tight range on Wednesday as investors held off from making large bets as they prepared for key US jobs data that could influence the Federal Reserve’s stimulus tapering strategy.
Spot gold slipped 0.2% to $1,811.18 per ounce by 11:15 a.m. EDT, holding above the key $1,800 level. The most active gold futures contract fell 0.4% to $1,811.00 per ounce in New York.
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Meanwhile, the dollar index edged up from a one-month low, making bullion more expensive for holders of other currencies.
The US non-farm payrolls report for August is set to be released on Friday. Economists polled by Reuters predicted payrolls to increase by 750,000 for the month.
While the data is expected to be good given the strength in the labour market, if it exceeds expectations, this might lead to a stronger dollar and put “some pressure on gold,” Commerzbank analyst Daniel Briesemann wrote in a note to Reuters.
Last week, Fed chairman Jerome Powell acknowledged in his remarks at the Jackson Hole symposium that tapering could begin this year, but it will remain cautious in its decision to raise interest rates.
“The lack of follow-through in gold (after Jackson Hole symposium) is very telling of the fact that the market recognizes that the direction for policy is now starting to wind back stimulus,” DailyFX currency strategist Ilya Spivak said.
Although gold is considered a hedge against inflation and currency debasement caused by massive stimulus measures, lower interest rates also reduce the opportunity cost of holding the non-yielding bullion.
Indicative of sentiment, holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, have fallen to their lowest level since April 2020.
(With files from Reuters)