Gold just managed to hold on to its first advance in 11 sessions as a technical rebound outweighed a drop for U.S. jobless claims that underscored concern that policy makers will raise interest rates soon.
Futures in New York added 0.2 percent, after rising as much as 1.2 percent. The metal pared gains after a government report showed the fewest Americans in four decades filed applications for unemployment benefits last week. A stronger labor market bolsters the case for a rate rise, which cuts the appeal of bullion because it doesn’t pay interest, unlike competing assets.
Speculators have amassed record short holdings in the metal, meaning they’re wagering that the price may further decline. To some analysts, such as David Wilson of Citigroup Inc., that’s a sign that gold will eventually rise when bearish investors buy the metal to exit their positions. Others, including Goldman Sachs Group Inc.’s Jeffrey Currie and Robin Bhar of Societe Generale AG, say the metal will keep falling.
“We’ve seen a massive sell-off, and the market got ahead of itself,” said Chris Gaffney, the president of the EverBank World Markets in St. Louis, said in a telephone interview. “A stronger labor market should convince the Fed to go ahead and raise rates, maybe as soon as the September meeting. Until we see some inflation creep back or some safe buying, the price is going to remain under pressure.”
Gold futures for delivery in August rose $2.60 to settle at $1,094.10 an ounce at 1:45 p.m. on the Comex in New York. Prices dropped in the previous 10 sessions, the longest rout since 1996.
The dollar took a pause from its rally on Thursday, adding to gold’s appeal as an alternative. The Bloomberg Dollar Spot Index slid as much as 0.4 percent. The metal’s 14-day relative strength index has stayed below 30 since July 20, when prices fell to a five-year low. Readings below that level signal to some analysts who study charts that a security is oversold, and may be poised for a rebound.
Still, bullion has fallen almost every day in July, leaving the metal poised for the biggest monthly decline since June 2013.
It’s been a painful two years for gold bulls, who by the end of 2012 had accumulated a record position after piling into gold exchange-traded funds and similar investments backed by the metal. Since then, more than $84 billion has been erased from the funds’ value, and their assets have dropped to the lowest level since March 2009.