As speculators look at the end of the year, they will be busy booking as much profits as they can to improve their balance sheets and profit ratios. This means we will seem some volatility with traders jumping from commodities to equities to currencies. Traders will be closely watching the ECB meeting this week but the marquee event will be Friday’s nonfarm payroll in the US, which will be followed by weekly inventory reports and then move to focus on the US Federal Reserve meeting on December 17-18th. Gold gave back some of Friday’s gains as traders book profits dipping by $4.10 to trade at 1246.30 in a surprising convergence both gold and the US dollar declined this morning. The US dollar dipped by 12 pips to trade at 80.56. Gold dropped this morning, with investors jittery ahead of key US data this week that could provide clues on when the Federal Reserve will begin scaling back its monetary stimulus. US data including nonfarm payrolls, third quarter GDP and manufacturing PMI will be released this week, giving more insight into the strength of the economy. A strong recovery could prompt the Fed to begin cutting back its $85 billion in monthly bond purchases, denting gold’s appeal as a hedge against inflation. The US central bank next meets on Dec. 17-18, when it could decide the fate of its stimulus.
Gold futures rose on Friday in thin trade, but remained under pressure as ongoing expectations for the Federal Reserve to soon begin tapering its asset-purchase program continued to weigh. Gold prices rose on due to a weaker dollar but made its biggest monthly drop in five months on signs of recovery in the U.S. economy. Prices were also hurt as Eurozone CPI increased more than forecast, which indicated that the ECB would refrain from easing monetary policy further. Investors are likely to remain cautious this week ahead of US economic data on manufacturing growth, GDP, non-farm payroll numbers. The data would give insight on the duration of Fed’s bond buying program. Silver price rebounded at the domestic bullion market on renewed off-take from jewelers and traders as well as strong buying in India at the existing lower level amid ongoing marriage season. Silver is trading at 19.845 down by 185 points.
The metal has lost over a quarter of its value this year due to record outflows from gold-backed exchange-traded funds as investors shifted money to rallying equities. Markets seem to have already priced in a possible stimulus tapering from this month due to strong economic data, with gold prices trading below $1,300 an ounce for over three weeks.
This morning data showed that China’s Purchasing Managers’ Index was 51.4 in November, the National Bureau of Statistics and China Federation of Logistics and Purchasing reported. China HSBC PMI November data signaled a further improvement of operating conditions in China’s manufacturing sector, albeit marginal. Output and new order growth both increased at their strongest rates in eight months in November, but renewed job shedding led to a solid increase in outstanding business. The good news which should help boost metal prices had little effect on copper which declined by 7 points to trade at 3.198. Copper prices gained slightly on Friday due to a weaker dollar and lower stockpiles. However copper posted its biggest monthly loss since June on expectations of growing supply and tepid demand going forward. Base metals are expected to remain in range to lower today as investors are likely to remain cautious ahead of US, UK and Eurozone PMI numbers.