LONDON: Gold firmed as European equities fell on Monday, but prices struggled to reach the $1,200 per ounce level after robust US non-farm payrolls pushed the dollar to a more than five-year high.
Spot gold rose 0.1 per cent to $1,193.05 an ounce by 1303 GMT. The metal lost 1.1 per cent on Friday when US data showed employers added the largest number of workers in nearly three years in November and wages picked up.
US gold futures rose 0.2 per cent to $1,193.00 an ounce.
The strength in the economy could draw the Federal Reserve closer to raising interest rates, lift the dollar and in turn decrease demand for gold.
“Everybody has factored in interest rate increases next year and everybody is expecting continued dollar strength ... so we tend to be quite neutral on gold at the moment,” Citi analyst David Wilson said.
The dollar was trading close to its highest since March 2009 on the back of the strong jobs report.
In the years after the 2008 financial crisis, gold was boosted by central bank liquidity and a low interest rate environment, which encouraged investors to put money into non-interest-bearing assets.
“We suspect that gold will likely be at its most vulnerable over next three to six months, which is when we see the highest likelihood of a rate hike that should sweep the dollar higher,” INTL FCStone analyst Edward Meir said.
Gold was supported, however, by lower European shares following soft economic data from China and Japan and an S&P downgrade of Italy’s credit rating.
For now, some market players say gold could hold near $1,190, based on recent data on investor positioning.
Hedge funds and money managers pushed a bullish position in US gold contracts to the highest level since August in the week to Dec. 2, data shows.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.12 per cent to 720.91 tonnes on Friday, though still close to a six-year low.
Among other precious metals, platinum rose 1.2 per cent to $1,230.45 an ounce. Silver was down 0.3 per cent at $16.21 an ounce and palladium rose 0.4 per cent to $801.50 an ounce.
