PRECIOUS-Gold dips for fifth day; worst week since May
MARKETS-PRECIOUS (UPDATE 7)
* Gold’s worst weekly loss since May on economic optimism
* U.S. December nonfarm payrolls rise less than expected
* Indian gold imports seen jumping 64 pct in 2010
* Coming up: U.S. wholesale inventory on Tuesday (Recasts, adds comments, updates market activity, changes byline, new dateline, previously LONDON)
By Frank Tang
NEW YORK, Jan 7 (Reuters) – Gold dipped on Friday, set for its biggest weekly decline since May after disappointing U.S. jobs data failed to revive safe-haven demand.
Bullion declined for a fifth day, its longest losing streak in seven months, although it closed up from a six-week low after data showed U.S. employers hired fewer workers than expected in December, and a surprise fall in the unemployment rate was blamed on people giving up the search for work.
The 4 percent decline this week has called into question gold’s lengthy bull run as traders look forward to a U.S. economic recovery that Federal Reserve Chairman Ben Bernanke said “may be taking hold” even if growth remains too weak to put a real dent in the nation’s jobless rate, although continued jitters over the euro zone have limited the decline.
“Money is moving out of bonds and gold into the broader equity market as investors are willing to take on more risks thinking that economic conditions have improved,” said Brian Hicks, co-manager of Global Resources Fund of the $2.9 billion fund manager U.S. Global Investors.
Friday’s payrolls data, however, showed there are still economic challenges on the horizon, he added. Hicks said that he expects gold to rangebound near term until the market finds a new catalyst such as next Friday’s U.S. consumer prices data.
Spot gold fell 0.3 percent to $1,366.55 on ounce at 1:36 p.m. EST (1836 GMT), having earlier touched a low of $1,352.30 an ounce, its weakest since Nov. 26.
Gold’s upward trend has weakened after prices breached below 50-day moving average for the first time since August, but a rebound is possible if it can hold above key technical support near $1,360 an ounce.
On charts, gold has breached below two important support levels, namely its 50-day average at $1,382 an ounce and its December lows at the $1,360s, said Adam Sarhan, chief executive of New York-based Sarhan Capital. (Graphic: http://link.reuters.com/kat35r)
“At this stage of the game, gold is at a very important inflection point. As long as gold holds above the $1,360s, we should be able to see a bounce,” Sarhan said.
JOBS DATA SHADES UPBEAT DATA
Prices bounced after Friday’s jobs data dimmed some of this week’s optimism fueled by a raft of better-than-expected U.S. data including purchasing managers’ index, new factory orders and upbeat private-sector jobs data.
However, a rise in the U.S. dollar to its highest in nearly four months against the euro weighed.
U.S. gold futures for February delivery dropped $2 an ounce to $1,369.70.
Gold fell in tandem with other commodities this week as some investors unwound solid gains made on thin volume in gold and other precious metals over the holidays. Gold rose nearly 3 percent in December, and was up 29.6 percent last year.
But many dealers remain loath to give up on the unprecedented 10-year rise in gold prices, saying they’ll wait for far more evidence of a sustained recovery and stability in Europe.
“The United States has had a whole run of decent data, and that has increased risk appetite and decreased gold’s allure as a hedge,” said VM Group analyst Carl Firman.
“If you have a sustained period of good, positive U.S. data, which points towards a good U.S. recovery, the dollar is bound to strengthen slightly, and that is generally negative for the gold price,” he added.
Strong physical demand could also lift prices after recent decline. The head of the Bombay Bullion Association told Reuters that gold imports to India, the world’s largest consumer, are likely to jump 64 percent to 500-550 tonnes in 2011.
Gold-backed exchange-traded funds continued to see outflows, with holdings of the largest, New York’s SPDR Gold Trust, falling to a seven-month low on Thursday.
Silver dropped 1 percent to $28.76 an ounce. Platinum slipped 0.1 percent at $1,727.24 an ounce, while palladium eased 0.6 percent at $753.97. (Additional reporting by Jan Harvey in London; Editing by Marguerita Choy)