London: Gold inched down on Friday, but remained within striking distance of the key $1,000 an ounce as the dollar edged up against a basket of currencies and the market held its breath ahead of the U.S. payrolls data.
Traders said the market was vulnerable to the downside due to a heavy build up of long positions and after bullion failed to stay above $1,000 an ounce.
Gold was at $996.10 an ounce at 1124 GMT, compared with $998.50 an ounce on Thursday. Bullion rose to an 18-month high of $1,023.55 an ounce in September, a tad lower than its record high of $1,030.80 an ounce, struck in March 2008.
“The market’s primarily driven by the dollar,” said Ole Hansen, senior manager at Saxo Bank, adding the activity was subdued with investors awaiting key U.S. payrolls data, due at 1230 GMT.
If non-farm payrolls come in weaker than the expected 180,000 job losses, it could renew fears about recovery in the world’s largest economy and bolster the dollar, seen as a safe haven.
Gold is often viewed as an alternative to holding the dollar and benefits from weakness in the U.S. currency, which makes it more affordable for those buying in other currencies.
“Should the pace of payroll losses have declined a bit in September as our economists expect, this could push gold back above $1,000, because there has recently been a negative correlation between the gold price and risk aversion,” Commerzbank said in a research note.
In addition, the heavy long positions built up in the market made bullion vulnerable to a correction, traders said. “My feeling is any uptick at the moment is a sell opportunity because the market is still pretty long,” Hansen said.
The non-commercial net long position in gold futures on the COMEX division of the New York Mercantile Exchange stood at an all-time high of 236,749 lots for the week ended Sept. 22, figures from the Commodity Futures Trading Commission showed.
U.S. gold futures for December delivery were at $999.5 an ounce, versus Thursday’s $1,000.7 on the COMEX division of the New York Mercantile Exchange.
“We would look for gold to hold the $985-1,020 area but gold remains at risk to a deeper correction as falling risk appetite could spook some of the recently added fund longs,” said James Moore at Thebulliondesk.com in a research note.
Moreover, several traders said there was insufficient support for gold from the physical side.
“Supply and demand fundamentals are capping the gold price. Scrap is becoming more available and jewellery demand goes down every time the price goes up,” said Tony Parry, a gold analyst at Sydney-based Resource Capital Research.
The economic downturn and high prices this year have knocked down demand for gold in Turkey, one of the top consumers of bullion, which is now heading for the lowest ever recorded annual import levels.
The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings stood at 1,095.327 tonnes on Oct. 1, unchanged from the previous business day.
Among other precious metals, silver was lower at $16.20 from $16.32, Platinum was at $1,268 from $1,277.5 and palladium was at $289 from $287.50.