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London - Gold dipped on Thursday after better-than-expected US manufacturing data pushed equities into positive territory, with investors weighing up the prospect of a fresh round of quantitative easing from the US Federal Reserve.
The metal posted its strongest monthly gain in August since November 2009 as a run of soft economic data fuelled speculation the Fed would print more money to shore up the flagging economy.
Trade was volatile in the absence of clear direction.
Thursday’s US manufacturing reading took the heat out of recession fears, however. Bund futures pared gains after the report, while the dollar extended gains against the yen.
Spot gold eased 0.2% to $1 819.49 an ounce at 14:27, having earlier risen as high as $1 829.90.
US stocks turned higher on Thursday after the key ISM survey of the factory sector showed activity grew in August.
European stocks pared early losses to turn higher.
“Gold might slip even further since the ISM at 50.6 reduces overall risk aversion and at the same time the possibility of QE3,” said Commerzbank analyst Eugen Weinberg.
Investors entered September in a bearish mood, with Reuters asset allocation polls on Wednesday showing leading fund companies were holding less than 50% of their mixed-asset portfolios in stocks.
“The market I think is betting on further policy support for the economy, which would be positive for gold,” said Credit Agricole analyst Robin Bhar.
“There is a lot of uncertainty out there, and all the drivers for gold - the financial uncertainties, the economic imbalances, the debt burdens, the currency debasement, the deflation/inflation debate - are still positive in the short to medium term.”
These factors have sparked a 29% rise in gold prices this year, driving the precious metal to a record $1 911.46/oz early last week before its sharp correction.
US gold futures <GCv1> for August delivery were down $9.80/oz at $1 821.90.
Data awaited Investors are now awaiting Friday’s non-farm payrolls report, a key barometer of economic conditions. Weak data would make further US easing more likely.
Earlier on Thursday non-farm productivity numbers for the second quarter came in weaker than expected, while new US claims for unemployment benefits fell as expected last week.
US Treasuries rose as the data stoked fears about a recession.
Among other commodities, oil prices turned higher after the supportive US manufacturing data, while base metal fell on the firmer dollar and a drop in Chinese export orders.
Silver prices fell 0.5% at $41.28/oz.