London - Gold firmed on Friday as a rise in stock markets and a slide in the dollar to 14-month lows against the euro helped it offset the previous session's drop, but the move was muted ahead of a monthly US payrolls report.
The precious metal's fortunes are pegged to the health of the US economy, with recent signs of recovery, which dampened hopes for further monetary easing, capping gains.
Spot gold was up 0.1 percent at $1,644.44 an ounce at 12:16 SA time, while US gold futures for February delivery were up $3.80 an ounce at $1,665.80. It held just above its 200-day moving average at $1,663 an ounce, a key chart level.
Prices rose as high as $1,683 this week after a disappointing reading of US growth in the last quarter suggested optimism over economic growth was premature, but fell nearly 1 percent on Thursday as momentum petered out.
“Gold has had a good correlation with non-farm payrolls,” Citigroup analyst David Wilson said. “(If the number disappoints), we should see gold bounce.”
Short-term moves aside however, the metal was likely to remain rangebound, he added. “There is potential for more upside as we get towards the end of February and the US starts looking at the whole debt issue, but we're agnostic on a short- to medium-term view,” he said.
On the wider financial markets, a slide in the dollar to a 14-month low against the euro after better-than-expected euro zone manufacturing data and a rise in stock markets helped support gold prices.
German Bund futures fell as markets resumed a shift away from assets used as a hedge against economic weakness and financial stress.
Gold has historically been seen as a haven from risk, but over the last year it has moved in line with assets seen as higher risk, like stocks, after the US dollar and Treasuries took over from the metal as investors' haven of choice.
“Ever increasing macro confidence has dented bullion's traditional safe haven appeal while alternative and more volatile assets, including platinum group metals, offer better returns away from gold,” VTB Capital said in a note.
Gains across the financial markets were limited by uncertainty ahead of US non-farm payrolls data due later. The report, due at 15:30 SA time, is forecast to show 160,000 jobs were added in January, which analysts say would be sufficient to sustain belief that the US economy is still improving.
“Current price levels, which are essentially where gold hovered before the US GDP print, suggest that expectations are once again skewed towards positive payrolls figures,” UBS said in a report.
“This increases the risk of a sharp move higher should the data significantly deviate from expectations on the downside. On the other hand, evidence of an improving US labour market would weigh heavily on gold given its impact on policy expectations, but keep in mind that much has already been factored in.”
From a technical perspective, near-term support is seen for gold at this week's low at $1,652 an ounce, with a stronger floor identified below that around $1,625, its 2013 low and an area of strong resistance from last summer.
“Short-term, (gold) may consolidate above the rising trend line at $1,658 but must break $1,672 to rebound towards the former channel at $1,690,” Societe Generale said in a note.
Spot silver was down 0.2 percent at $31.36 an ounce, tracking modest gains in gold.
Spot platinum was down 0.3 percent at $1,672.24 an ounce, while spot palladium was up 0.6 percent at $745 an ounce.
CME Group, which operates the Nymex and Comex markets, said it will add platinum and palladium options to its Globex electronic platform from late in February in a move to capitalize on growing investor interest in the metals. - Reuters