Gold eased back towards its lowest since mid-August on Monday as stock markets firmed and the dollar steadied, and after US payrolls data failed to provide clarity on the timing of a Federal Reserve rate hike. Having failed to benefit from recent turmoil in stock markets after China devalued its currency last month, gold is now struggling to find direction outside of US monetary policy, analysts said.
Spot gold was down 0.3 percent at $1,119.10 an ounce by 2:30 pm EST (1830 GMT), while US gold futures for December delivery were down $3 an ounce at $1,118.40 with activity subdued by the US Labour Day holiday. "Gold didn't do enough during the equity market turmoil in China, or the yuan devaluation in China. People were expecting it to go up and it didn't, so they lost interest," Citi analyst David Wilson said.
"The market has already assumed that there may not be a September rate hike, so if anything, if there is a hike, there is more risk on the downside." Spot gold lost 1 percent last week and has fallen more than 5 percent this year, largely on expectations for a rise in US interest rates. That would lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
Bullion traders said uncertainty over the timing of a hike will keep gold under pressure until the Fed meets on September 16-17. The Fed has already indicated that the timing of a hike is largely data-dependent. Friday's non-farm payrolls report showed the US economy added fewer jobs than expected last month, though the unemployment rate fell to its lowest since 2008.
"The number was too good for those who hoped that the Fed would postpone the rate hike, and too little for those who were hoping (they'd go ahead with) it. That's why on the gold side, the market just got stuck," Julius Baer analyst Carsten Menke said. European stocks rose on Monday, lifted by mining and commodities giant Glencore after it pledged to slash its debt by a third. The dollar index steadied. Gold prices got little support with the resumption of trading in key gold consumer China after public holidays. Premiums on the Shanghai Gold Exchange were steady at about $4 an ounce on Monday, indicating stable buying interest. Among other precious metals, silver was down 0.6 percent at $14.48 an ounce, while platinum was down 0.6 percent at $982.75 an ounce and palladium was up 1.2 percent at $578.25 an ounce.
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