Gold falls despite Fed stimulus speculation

Gold futures traded down during U.S. afternoon hours Monday, as Friday’s weaker-than-expected U.S. jobs report bolstered hopes that the Federal Reserve would soon spark buying with a third round of stimulus. On the Comex division of the New York Mercantile Exchange, gold futures for October delivery traded at USD1,729.05 a troy ounce during U.S. morning trade, falling 0.52%. Earlier in the day, prices fell by as much as 0.60% to trade at a session low of USD1,728.45 a troy ounce. Gold futures rallied to USD1,741.95 a troy ounce on Friday, the highest since February 29. Gold futures were likely to find support at USD1,685.35 a troy ounce, the low from September 3 and at USD1,761.85, the high from February 20. Gold prices rallied to a six-and-a-half-month high on Friday after the Department of Labor said the U.S. economy added 96,000 jobs in August, well below expectations for 125,000, following a downwardly revised 141,000 in July. The unemployment rate ticked down to 8.1% from 8.3%, as more jobless workers exited the labor force. Gold traders are now looking ahead to the Fed’s next policy meeting, which will take place on September 12 and 13, for more clarity on the central bank’s monetary policy. Last week in a speech delivered in Jackson Hole, Wyoming, Fed chief Ben Bernanke said the persistently high rate of unemployment was a “grave concern” and reiterated that the central bank was ready to provide additional policy accommodation as needed to shore up growth. Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would pump more money into the financial system. Market players were also eyeing Wednesday’s German court ruling on the constitutionality of the European Stability Mechanism, as Germany’s approval will be necessary in order to implement the new bond-buying plan announced by the European Central Bank last week. Under the terms of the plan, the ECB would buy unlimited amounts of government bonds of up to three years in maturity, as long as the country in question agrees to economic reforms in return for assistance. Gold prices have rallied on past monetary stimulus measures. Investors tend to flock to gold on fears that excess liquidity would erode the value of fiat currencies and spark inflation. The precious metal is widely considered a hedge against rising consumer prices and a store of value. Elsewhere on the Comex, silver for December delivery shed 0.40% to trade at USD33.55 a troy ounce, while copper for December delivery rallied 0.91% to trade at a four-month high of USD3.679 a pound.

Courtesy: ForexPros