Gold rises on China post-holiday buying; weaker dollar supports

Gold edged higher for the second straight session Monday, after falling in the preceding eight, buoyed by post-holiday buying in China and a weaker dollar, while a slowdown in U.S. job growth bolstered expectations that U.S. interest rate hikes would only be gradual.

Spot gold was up 0.6 percent at $1,263.48 an ounce by 0500 GMT. U.S. gold futures rose more than 1 percent to $1,265.30 an ounce.

“Gold prices are quite appealing after the recent correction. In China, what we see today (after a week-long holiday) is that there is some demand to buy gold following its dip,” said Richard Xu, a fund manager at HuaAn Gold <518880.SS>, China’s top gold exchange-traded fund (ETF).

The yellow metal touched a four month low of $1,241.20 on Friday. Spot gold ended about 4.5 percent lower last week, its biggest weekly decline since November 2015.

“We expect gold to remain buoyant, looking for support around $1,250 following Friday’s encouraging move back above the level on the less than impressive U.S. jobs data,” MKS PAMP Group trader Sam Laughlin said in a note.

The metal is highly sensitive to U.S. interest rates, increases in which lift the opportunity cost of holding non-yielding gold while boosting the dollar, in which it is priced.

U.S. employment growth eased for the third straight month in September and the jobless rate rose, the Labor Department said in a report on Friday.

The data showed that the economy was on firm ground, but not growing so swiftly as to knock the U.S. central bank off its game plan of raising borrowing costs only gradually.

The dollar index, which measures the greenback against a basket of six major currencies, fell 0.1 percent to 96.531.

Spot gold may break a resistance at $1,266 per ounce and edge up to the next resistance at $1,276 before resuming its downtrend, according to Reuters technical analyst Wang Tao.

The safe haven asset was fairly subdued in its reaction to the second U.S. presidential debate between Democrat Hillary Clinton and Republican Donald Trump.

“Talks related to the presidential election don’t count. Once elected most of the candidates follow the same practices. They don’t opt for extreme measures like they promise in their campaigns,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

Financial markets saw less chance of a victory by Trump in his U.S. presidential bid amid a scandal over vulgar comments he made about women.

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 1.19 percent to 958.90 tonnes on Friday.

Hedge funds and money managers reduced their net long positions in COMEX gold contracts to four-month lows in the week to Oct. 4, as prices tumbled, U.S. government data showed.

Among other precious metals, silver was up 1.2 percent at $17.72.

Platinum edged 0.5 percent higher at $969.60, having touched a low of $946.40 an ounce on Friday, its lowest since April 7.

Palladium snapped a five session fall gaining 1.6 percent at $675.80.

Source: Reuters