Gold Pulled Around in Tug of War Between Strong U.S., Weak China

  • Higher-than-expected payrolls may signal further rate increase
  • China stocks extend world's worst selloff amid growth concerns

Gold's Safe Haven Status Rises From the East

Gold swung between gains and losses after posting the best week since August, with more declines in Chinese stocks offering haven support and strong U.S. jobs data curbing gains.

Gold futures for February delivery dropped 0.2 percent to settle at $1,096.20 an ounce at 1:48 p.m. on the Comex in New York, after climbing as much as 0.9 percent. U.S. payrolls rose by 292,000 in December, topping estimates, while Chinese shares fell to the lowest since September, adding to the world’s worst selloff this year.

Investors bought the most gold through exchange-traded funds in three weeks on Friday, data compiled by Bloomberg showed. The holdings climbed 9.1 metric tons to 1,475.3 tons after rising 8.1 tons the day before.

“Gold is holding well despite strong U.S. employment data, although seems to be facing resistance at the 100-day moving average at $1,109 for now,” Joni Teves, a strategist at UBS Group AG, said in an e-mailed report on Monday. “ETF inflows help.”

Gold has climbed 3.4 percent this year as escalating concerns about China’s outlook, a rout in equities and increased geopolitical tensions in the Middle East and North Korea stoked investors’ aversion to risk. Those factors should abate as the year progresses, causing investors to refocus on monetary policy in the U.S., which has pointed to interest-rate increases this year, according to Barnard Dahdah, a London-based analyst at Natixis SA.

“With the U.S. dollar strengthening, the currency is becoming a safe haven in itself, and offering some yield,” he said by phone. “That creates competition for gold.” Dahdah sees gold dropping below $1,000 an ounce this year.

U.S. employers’ additions to the country’s workforce in December exceeded the highest estimate in a Bloomberg survey, a Labor Department report showed on Friday. The data backed the case for the Federal Reserve to continue raising interest rates this year, boosting the dollar and undermining gold’s rally.

Silver futures for March delivery dropped 0.4 percent to $13.866 an ounce on the Comex. On the New York Mercantile Exchange, platinum futures for April delivery fell 3.7 percent $846.30 an ounce, while palladium futures for March delivery slumped as much as 4.2 percent to $473.05 an ounce, the lowest since 2010.

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