Gold falls for sixth day on stronger dollar, U.S. data in focus

Gold futures fell for a sixth day on Tuesday as the U.S. dollar rebounded from Mondays losses after the euro reversed earlier gains. Market players remained cautious ahead of a European Central Bank policy meeting later this week and the release of crucial U.S. employment and GDP data, which is expected to provide indications of when the Federal Reserve might begin decelerating its monetary stimulus. Silver, platinum and palladium tracked the yellow metals downward momentum.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in December traded at $1 312.30 per troy ounce at 9:33 GMT, down 0.18% on the day. Prices shifted in a days range between $1 318.10 and $1 309.20 an ounce. The precious metal fell for a fifth consecutive day on Monday and extended its weekly decline to 0.3% on Tuesday after losing 2.6% last week.

Gold traded in a narrow range as market players remained wary ahead of the release of key data points later in the week and policy meetings by the European Central Bank and Bank of England. The U.S. dollar index, which measures the greenbacks performance against a basket of six major peers, traded at 80.72 at 9:15 GMT, up 0.08% on the day. The December contract held in a days range between 80.76 and 80.61. The U.S. currency gauge slipped 0.2% on Monday and trimmed its weekly decline to 0.1% on Tuesday.

Investors avoided taking big positions ahead of this week’s policy meetings in Europe on Thursday and the release of highly anticipated U.S. data. On Tuesday, the Institute for Supply Management will likely report the U.S. service sector expanded at a slightly slower pace in October from a month earlier.

On Thursday, the preliminary reading of the U.S. Q3 GDP growth may show a smaller expansion compared to the preceding three months. Personal Consumption Expenditures probably fell in the third quarter, while core consumer spending is expected to have advanced.

On Friday, October’s non-farm payrolls are projected to have further eased, while the unemployment rate likely inched up to 7.3%, according to analysts’ expectations. Personal income and personal spending are projected to have risen at a slower pace from a month ago. The preliminary reading of the Thomson Reuters/University of Michigan Consumer Sentiment Index may show a rebound to 74.5 in November, up from 73.2 in October.

Mark Keenan, a strategist at Societe Generale SA in Singapore, commented for Bloomberg: “The Fed’s tapering is highly data-dependent and the market will focus very much on the employment. Anything that suggests the stimulus will remain in place will be supportive for gold.”

Fed officials seemed less optimistic about economic growth last Wednesday, and were especially worried about the recovery of the housing and labor markets, pledging to maintain the current $85-billion-per-month bond purchasing pace until “the outlook for the labor market has improved substantially.” However, policy makers noted there were signs of “underlying strength” in the economy and kept a tone which left the 16-day government shutdown in October and the possibility for a U.S. debt default on the sidelines, shifting focus to upcoming key data points.

A better than expected non-farm payrolls report this week will fuel speculations the Federal Reserve may commence scaling back its monthly bond purchases earlier than expected. Even if readings match expectations however, the central bank is broadly expected to trim its monetary easing program early next year, most likely in March, which leaves market players bearish in the mid- and long-term.

Recent contradicting announcements by senior central bankers also added to short-term volatility. St. Louis Fed President James Bullard, one of Fed’s stimulus supporters, told CNBC television yesterday the central bank shouldn’t rush tapering its monthly bond purchases because of low inflation, which has been running well below policy makers’ 2% official target. Apart from him, two other Fed officials who vote on policy this year, Governor Jerome Powell and Boston Fed President Eric Rosengren, indicated yesterday the central bank may refrain from tapering for some time.

“For me, you don’t have to be in a hurry because of low inflation,” Bullard said. He also added the 16-day government shutdown would not do lasting harm to the economy, but he acknowledged the political wrangling did hurt confidence. The Fed however shouldn’t wait for a permanent budget deal before taking action, he said.

Bullard’s comments came after Federal Reserve Bank of Dallas President Richard Fisher, one of the central bank’s quantitative easing program opponents, said that the Federal Reserve should put an end to its bond purchases as soon as possible. Fisher said he wouldn’t rule out backing a deceleration of the program by March, depending on the economic conditions.

“I would say in terms of my own support, that I wouldn’t rule out my supporting doing something before March. It’s really a question of what the circumstances are at the time and how the financial markets, and most importantly, the real economy is doing, ” Fisher said.

Elsewhere on the precious metals market, silver futures for settlement in December fell by 0.18% to $21.660 per troy ounce by 9:30 GMT. Prices plunged to a session low of $21.565, the weakest level since October 17. Platinum for delivery in January traded at $1 451.40 an ounce, down 0.33% on the day, and shifted in a days range between $1 459.55 and $1 448.15 an ounce. Palladium December futures plunged 0.63% to $744.80 per troy ounce and held in range between days high and low of $748.90 and $744.00 an ounce respectively.