Gold futures set for longest weekly drop since September ahead of US jobs data

Gold futures headed for a third weekly slump, the longest run of losses since September, ahead of a government report that is forecast to show US employers added the most workers since November, while unemployment fell to a five-year low, backing the case for the Federal Reserve to keep cutting monetary stimulus. Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged for a second day yesterday, after dropping to the weakest level in almost a month.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in June traded at $1 287.30 an ounce by 06:46 GMT, adding 0.21% for the day. Prices shifted in a tight daily range between $1 287.80 an ounce and $1 284.50 an ounce. The precious metal headed for a 0.6% decline this week after sliding to $1 278.10 an ounce on April 1, the weakest level since February 11.

Bullion has lost 3.1% in March as the US economy expanded at a faster-than-expected pace and after Federal Reserve Chair Janet Yellen said the central bank’s bond-buying program may be brought to an end this fall, with borrowing costs starting to rise by mid-2015. The Federal Reserve trimmed its monthly bond-buying program by $10 billion at the last three meetings.

However, the precious metal rose 7 percent in the first quarter as demand for haven assets was boosted amid a rout in emerging markets and Russia’s annexation of Crimea, which left Russia and the West involved in their worst conflict since the end of the Cold War.

“Gold will stick to a tight trading range as traders look to U.S. economic data for direction,” said Ethan Wai, a research analyst at Wing Fung Financial Group, a Hong Kong-based gold trader and refiner, cited by Bloomberg.

Fed stimulus outlook

Bullion prices were pressured following a report by Automatic Data Processing Inc. (ADP) on Wednesday that showed the US private sector added 191 000 workers last month after February’s number was revised up by 39 000 to 178 000, However, analysts’ forecasts called for a 195 000 gain in March.

The ADP report usually comes out two days before the official employment report by the Bureau of Labor Statistics (BLS), thus, providing clues over the tendency in nation’s non-farming sector. The government report scheduled to be released later today may show private payrolls rose by 200 000 in March, the most in four months, according to the median experts’ forecast. Data may also show that the jobless rate stood at 6.6% last month, matching Januarys reading and the weakest since October 2008. If confirmed, these data points will add to signs the US labor market is strengthening, which will back the case for further stimulus reductions.

Fed President for St. Louis James Bullard said on April 2 that if inflation slows further, decreasing the pace of Fed tapering cannot be ruled out, even though he didn’t expect that to happen.

However, bullion drew support after Federal Reserve Chair Janet Yellen said on March 31 that the central bank needed to do more to fight against unemployment, because keeping interest rates near zero for more than five years and swelling its balance sheet with asset purchases seemed not to be enough. She also added that the US economy still needed monetary stimulus for “some time” and that most of the Fed officials shared the same opinion.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, were unchanged yesterday for a second day, after dropping to 810.98 metric tons on April 1, the weakest level since March 7. Holdings in the fund are up approximately 1% this year after it lost 41% of its assets in 2013 that wiped almost $42 billion in value. A total of 553 tons has been withdrawn last year.