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Singapore - Gold held near its three-week high as weaker US economic data damp prospects for an interest rate increase this month by the Federal Reserve.
Bullion for immediate delivery advanced 0.2% to $1 347.55 an ounce by 08:11, according to Bloomberg generic pricing. The metal touched $1 352.74 on Wednesday, its highest intraday level since August 19.
Gold is heading for the first annual gain in four years as demand has surged for haven assets following the Fed’s hesitation in raising borrowing costs and the UK’s vote to exit the European Union. Weaker US data, including a drop in a services gauge on Tuesday to a six-year low, is dimming the outlook for a rate increase.
Investor’s attention is now trained on the European Central Bank, which will review policy on Thursday and is forecast to maintain its unprecedented stimulus measures as President Mario Draghi lays out fresh growth and inflation projections for the eurozone. Weekly jobless claims in the US follow later in the day.
“Eyes would also be on tonight’s initial jobless claims, where any disappointment above the 265 000 mark should further fuel calls for the Fed to keep its rates on hold in its upcoming September meeting,” Barnabas Gan, an economist at Oversea-Chinese Banking, said by email. “Gold should go higher given tapering expectations of a Fed rate hike in both September and December.”
Odds for tightening in September dropped to 22% as of Wednesday, from 34% at the start of the month, while the probability of a move in December is at 52%, according to federal funds futures contracts. Either a deferral or a 25-basis-point hike would be “good for gold,” according to RBC Capital Markets.
“In the event the Fed announces a 25bps rate hike, it will be a forced hand, rather than a move to cool the economy, and as such would be more likely to be a one-time decision, potentially pushing out even further any additional raises,” RBC analysts led by Paul Hissey said in a note dated September 7.
The US economy grew at a modest pace in July and August as a strong labour market failed to put much upward pressure on wages and prices, according to the Fed’s latest Beige Book release published on Wednesday.
Holdings in bullion-backed exchange traded funds fell 0.9 metric ton to 2 030.1 tons on Wednesday, data compiled by Bloomberg show. In China, bullion of 99.99% purity was little changed at $1 349.67 an ounce on the Shanghai Gold Exchange.
On the Shanghai Futures Exchange, gold for December delivery dropped 0.2% to 290.25 yuan a gram, while silver lost 0.1% to 4 410 yuan a kilogram. Spot silver added 0.5%, platinum rose 0.3% and palladium climbed 0.8%.
