London: Gold prices eased back below $1,700 an ounce in Europe on Friday as stocks and the euro retreated, but trading was cautious ahead of a US employment report due later, which is closely watched for its implications for US monetary policy.
An early rally in European shares petered out after Germany’s Bundesbank cut its growth forecasts, less than 24 hours after the European Central Bank slashed economic forecasts for the Eurozone, also pressuring the euro.
Spot gold was down 0.1 per cent at $1,697.27 an ounce at 1024 GMT, off an earlier high of $1,703.55, while US gold futures for December delivery were down $3.00 an ounce at $1,698.80.
Gold prices have fallen nearly 1 per cent so far this week as uncertainty surrounding the US ‘fiscal cliff’, a $600 billion package of tax hikes and spending cuts due to take effect in the new year, kept buyers on the sidelines.
Superstorm Sandy is expected to put a dent in US employment growth in November, temporarily interrupting a recently established trend of modestly rising payrolls.
Analysts said a weak payrolls number, with a higher unemployment rate, could add to expectations that the Fed could further ease policy at its meeting next week.
“A weaker-than-expected number could have a (gold positive) impact on the Fed meeting, but it could also help force the hands of US politicians (over the fiscal cliff), as they can see that the economy is hurting from the lack of knowledge about where it stands on January 1,” Saxo Bank vice president Ole Hansen said.
Although gold prices quickly recovered from this week’s one-month lows on speculation that weak growth could spark further Eurozone interest rate cuts, investors have been reluctant to take positions ahead of the Fed meeting next week, clearer direction on fiscal cliff negotiations, and the payrolls data.
Non-farm employment is forecast to have increased by 93,000 jobs last month after advancing by 171,000 in October, according to a Reuters survey of economists. The unemployment rate is seen holding steady at 7.9 per cent.
Investors’ appetite for physically backed funds held firm, with holdings of gold exchange-traded funds hitting record highs at 76.133 million ounces on Thursday.
Buyers in major gold consumer India took to the sidelines, however, as prices lifted from one-month lows.
“Demand is not very high today as prices have increased. In the festival (December) quarter there was some revival in demand,” Mayank Khemka, managing director of Delhi-based wholesaler Khemka Group, said.
Gold imports from Hong Kong to China, vying with India as the world’s number one buyer, fell to 47.478 tonnes in October, data from the Hong Kong government showed on Friday, their lowest in ten months.
Silver was down 0.2 per cent at $32.89 an ounce. Spot platinum was down 0.2 per cent at $1,589.99 an ounce, while spot palladium was down 0.4 per cent at $685.20 an ounce.
“Supply issues in South Africa have helped eliminate surpluses in all major platinum group metals markets,” Morgan Stanley said in its 2013 Commodities Outlook. “We expect deficit markets to continue in 2013, with upside benefits for prices.”
“Industrial demand remains firm, and supply is constrained by South African labor issues, reduced sales from Russian stocks and lower recycling rates,” it said. “Among the PGMs, we believe fundamentals are better for palladium than platinum.”
The platinum/palladium ratio, which measures the number of palladium ounces needed to buy an ounce of platinum, held near six-month lows at 2.31 as palladium outperformed, down from its 2012 high of 2.65 hit in October.