Gold futures log minor gain after selloff

By Carla Mozee and Barbara

Kollmeyer, MarketWatch

LOS ANGELES (MarketWatch) — Gold futures rose Monday, logging a small gain after a 3% selloff at the end of last week was set off by stronger-than-expected U.S. jobs data.

Gold for August delivery GCQ3 +1.67% rose $8.70, or 0.7%, to $1,221.50 an ounce in electronic trade.

Investors on Friday lopped off $39.20, or 3.1%, from gold prices on worries the U.S. Federal Reserve later this year will start tapering its program of bond purchases, which analysts have said has been a source of support for gold prices.

Bloomberg News Enlarge Image
Gold reaches for gains following 3% selloff.
Those worries were reinforced after the U.S. Labor Department said the economy created 195,000 new jobs in June. Economists surveyed by MarketWatch had expected, on average, the addition of 155,000 jobs.

“The June payrolls figures are a confirmation that ongoing hiring is continuing to support the U.S. economic expansion,” CIBC economist Emanuella Enenajor wrote to clients Friday.

The Fed has said it may reduce the pace of government-debt purchases from its current level of $85 billion a month if the economy continues to improve in line with its expectations, and anticipation for such a move has weighed on gold prices this year.

Investors will look for more insight into the Fed’s outlook for monetary stimulus when minutes from its meeting in June are released on Wednesday.

“However, with hours worked slowing and broader measures of joblessness still elevated, it’s clear that we’re still very far away from a normal jobs market,” said CIBC’s Enenajor, adding they expect to see softer growth in the second quarter, and possibly, in the incoming months, some slowing in the pace of hiring.

Barclays analysts said in a note Monday that physical demand for gold is softer and the prices are more likely to endure more downside, given the size of cash negative exchange-traded products. Barclays predicts gold prices will be around $1,200 an ounce by the end of the third quarter and $1,393 at year’s end.

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The Next 24: Alcoa, Fed, J.P. Morgan
Some life may return to the markets next week as Alcoa kicks off quarterly earnings and the Fed releases minutes from its last meeting. J.P. Morgan Chase rounds out the week with its report. MarketWatch’s Laura Mandaro reports. (Photo: Getty Images)

“ETP holdings continue to bleed and are down 8 tonnes for the month of July so far. Total metal held in trust has fallen to 2168 tonnes, the lowest since June 2010, and net redemptions have reached 593 tonnes for the year to date,” wrote Suki Cooper and other analysts at Barclays in a note.

Gold prices on Monday managed to gain ground despite a rise in the U.S. dollar DXY -0.06% against the euro and other currencies, keeping the ICE dollar index at a three-year high. A stronger greenback can pressure dollar-denominated commodity prices by making futures more expensive for holders of other currencies.

Billionaire investor Jim Rogers said in an interview over the weekend that while he won’t sell his gold, he expects prices could push to $1,000 or $900 an ounce. In an interview with Business Insider published July 6, Rogers said a 50% correction for gold is possible and probably needs to happen after the metal’s 12-year run. “We got to shake out more people…Then gold prices will make a nice, firm bottom,” he said.

In other trade Monday, September silver SIU3 +2.26% picked up 7 cents to $18.80 an ounce. Platinum for October delivery PLV3 +1.63% rose $8, or 0.6%, to $1,334.40 an ounce, and September palladium PAU3 +1.99% rose $2.40, or 0.4%, to $679.95 an ounce.

September copper HGU3 +0.26% remained at $3.07 a pound.

Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @MWBarbaraKollmeyer.
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