1. Gold near 3-week high after US jobs data triggers short covering

Gold near 3-week high after US jobs data triggers short covering

Gold was trading near a three-week high on Monday, boosted by a short-covering rally after a strong U.S. nonfarm payrolls report cemented the case for a Federal Reserve rate hike next week.

By: | Sydney | Published: December 7, 2015 9:10 AM
gold prices

Gold fell to multi-year lows last week on expectations of a rate hike as higher rates tend to weigh on non-interest-paying gold by increasing the opportunity cost of holding it. But the jobs data triggered a short-covering rally. (Photo: Reuters)

Gold was trading near a three-week high on Monday, boosted by a short-covering rally after a strong U.S. nonfarm payrolls report cemented the case for a Federal Reserve rate hike next week.

Spot gold slipped 0.3 percent to $1,083.61 an ounce by 0037 GMT, but near $1,088.70 hit in the previous session, its highest since Nov. 16. It gained 2.3 percent on Friday after slumping to a near-six-year low earlier in the week.

Data on Friday showed U.S. nonfarm payrolls rose 211,000 last month, and the unemployment rate held at a 7-1/2-year low of 5.0 percent. September and October data was revised to show 35,000 more jobs than previously reported.

The robust data removed any doubts about a possible rate hike at the Fed’s next policy meeting on Dec. 15-16.

Gold fell to multi-year lows last week on expectations of a rate hike as higher rates tend to weigh on non-interest-paying gold by increasing the opportunity cost of holding it. But the jobs data triggered a short-covering rally.

Speculators’ short positions in gold are at a record high, according to latest U.S. government data on Friday.

Wall Street’s top banks expect the Fed to maintain a slow pace of interest-rate increases in 2016 after it first hikes rates later this month, according to a Reuters poll conducted on Friday.

Fed Chair Janet Yellen has the evidence of U.S. labour market health she wanted in order to raise benchmark interest rates for the first time in a decade this month, but she may have a tougher time selling further hikes.

An “uneasy calm” prevails in financial markets about the first increase in U.S. interest rates in almost a decade, which is widely expected later this month, the Bank for International Settlements said in its latest report.

Elsewhere, the richest Hindu temple in the world could soon come to the rescue of Indian Prime Minister Narendra Modi’s plan to recycle tonnes of idle gold and cut economy-hurting imports.

India is planning to ban imports of 24-carat gold jewellery in an attempt to curb the misuse of free trade agreements with Asian countries, the DNA newspaper reported on Friday.

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