adminLONDON — Gold edged higher on Friday but was still on course for the first weekly fall in six weeks due to strong US economic growth, concerns over the US Federal Reserve’s withdrawal of monetary stimulus and a slump in Chinese demand.Bullion had gained for most of January until this week, underpinned by weakness in global equities on concerns over emerging economies.
But upbeat US growth data reassured investors worried about capital outflows from emerging markets and also validated the Fed’s decision this week to reduce its monthly bond purchases to US$65 billion from US$75 billion, as expected.
Spot gold was up 0,4 percent at US$1 248,30 per ounce by midday after a 2 percent drop overnight. US gold futures for February delivery were up 0,5 percent at US$1 248,50/oz.
The metal was headed for a 1,7 percent loss for the week, after five straight weeks of gains. But January’s early strength was enough to push gold to its first monthly rise in five, up more than 3 percent so far.
“The market is struggling to break above the US$1 275 level or below US$1 225 and I think we will stay around these levels again next week as market participants position themselves ahead of the US non-farm payroll numbers,” MKS SA head of trading Afshin Nabavi said.
The US dollar index was up 0,3 percent on the day, close to a one-week high hit on Thursday. Global shares fell as they struggled to shake off the difficulties that have spread from emerging markets.
“You have strength of the dollar against emerging markets currencies, and that’s negative for gold,” Quantitative Commodity Research owner Peter Fertig said.
“But what is also important is the negative correlation between stock markets, especially the US ones, and gold and the weakness in emerging markets,” Fertig added.
“Fears that it may lead to widespread crisis are currently sending shivers through the stock markets.”
The turmoil in emerging markets is unlikely to derail the foundations of the global economic recovery, while the hawkish bias of the Fed remains in place, UBS said in a note.
Gold was also missing the support of physical demand as the world’s number one buyer China has gone into a one-week break. Chinese premiums had fallen to US$4 just before the holiday from over US$20 at the beginning of the month. – Reuters.
Online Reporter