Monday, August 5, 2013

Gold holds above $1,300/oz on Fed stimulus hopes

Gold held above $1,300 an ounce on Monday, but came under some pressure as the dollar steadied after mixed U.S. data last week left investors less sure the Federal Reserve would start to scale back its stimulus next month.

Early last week, strong U.S. GDP and factory figures led to losses in gold of around 3.5 percent. However, prices rebounded after data showed U.S. employers had slowed their pace of hiring, which quashed prospects the Fed will start tapering its bond-buying as early as September.

Spot gold was down 0.2 percent at $1,309.05 an ounce by 1339 GMT. U.S. gold futures for December fell $1.90 to $1,308.40 an ounce.

The dollar, softer initially, steadied against the yen and the euro. European shares edged up to a two-month high and benchmark U.S. Treasury yields fell to 2.6 percent, below July's two-year peak of 2.755 percent but still higher than at the start of the year.

As gold pays no interest, the returns from U.S. bonds are closely watched by market participants.

Gold, seen as a hedge against inflation, had gained in recent years as central banks acted to boost their economies. Prices touched an all-time high of $1,920.30 in 2011.

In recent weeks, the Fed has said it would begin tapering its $85 billion monthly bond purchases if the U.S. economic recovery retained momentum, prompting investors to monitor housing and jobs data closely.

The next data the market will watch is the U.S. ISM non-manufacturing PMI at 1400 GMT.

"People will monitor today's ISM numbers and you may see additional liquidation with a good number there, especially if the dollar continues to strengthen," MKS SA senior vice president Bernard Sin said.

"If we fall below $1,300, the next level I would look at is $1,270."

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