Gold Slips As the U.S. Dollar Bounces Back

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Gold prices inched lower on Monday on a stronger dollar. The greenback rose 0.1% and made the yellow metal more expensive for investors using rival currencies. Meanwhile, investors are monitoring the release of the September nonfarm payroll report. They want to see if it could influence the Federal Reserve’s tapering timeline.

Spot gold is currently trading at $1,759.21 per ounce as of 0701 GMT.

Economists forecast the addition of 460,000 new jobs in September. That is more than double the unexpectedly weak employment growth in August. The question is will that be enough to warrant a reduction in the Fed’s $120 billion monthly purchases of Treasury bills and mortgage-backed securities.

According to Philadelphia Federal Reserve Bank President Patrick Harker, the central bank is close to meeting its inflation target for raising interest rates. But the actual rate hike could still take a year or longer.

Cleveland Federal Reserve Bank President Loretta Mester agreed and said the conditions for an interest rate hike could be met by the end of 2022. She expects inflation to come back down near the 2% target once the supply side and pent-up demand factors ease.

Stephen Innes, a managing partner at SPI Asset Management, said gold price movements depend on the job report due on Friday. And it is not likely that the employment data would change the Fed’s view on a November taper. He sees a bearish long-term outlook for the bullion, but it could provide some short-term hedging against political disruptions. Innes predicts the metal to trade in the $1,740-$1,775 range this week.

In physical gold trading, demand in China rose last week. Traders said uncertainties such as the Evergrande crisis encouraged safe-haven investments. They also expect September imports to be higher due to “extraordinary demand.” There was also strong demand in Singapore, both retail and wholesale. Dealers expect more buying as the economy reopens and with the upcoming festivals.

In India, demand remained moderate because of price volatility. Local dealers said the sudden price increases on Thursday and Friday confused buyers.

In a related development, the U.S. Commodity Futures Trading Commission reported that market speculators reduced their net long positions in COMEX gold by 19,471 contracts in the week that ended on September 28. The holdings of the largest gold-backed exchange-traded fund, SPDR Gold Trust, fell by 0.4% to 986.54 tons on Friday. It reflects current market sentiment.