Gold prices hit their highest since mid-November on Friday as expectations that US monetary policy will remain ultra-loose boosted investor appetite for bullion, but struggled to maintain traction ahead of key US payrolls data later in the day.
Spot gold hit a high of $1,762.90 and was little changed at $1,759.00 an ounce at 12:15 SA time, against $1,759.39 late on Thursday. US gold futures for February delivery were up $3.20 an ounce at $1,762,50.
A Federal Reserve pledge last month to keep interest rates at rock-bottom levels and hints of another round of monetary easing, which would keep the dollar weak and the opportunity cost of holding bullion low, have helped lift gold prices by 12.5 percent this year.
Fed Chairman Ben Bernanke on Thursday defended the bank's policies against charges from Republican lawmakers they risked sparking inflation, saying the economy still needs plenty of support.
“Yesterday's reaffirmation from the US Fed (chairman) that he is committed to keep rates low... (has) given gold the necessary boost to hold gains and also break key resistance,” said Richcomm Global Services senior analyst Pradeep Unni.
“Any better-than-expected jobs figure today will further add to risk appetite, which may push gold above $1,784,” he added. “Disappointment in jobs data may drag gold below $1,730, but an extended sell off is not envisaged.”
A brief push higher in the euro, which has been rangebound versus the dollar for much of Friday morning, lifted both gold and platinum prices to their highest in 11 weeks.
The euro was largely rangebound versus the dollar, however, ahead of the payrolls numbers. The data due at 15:30 SA time, which is expected to show a 150,000 increase in payrolls last month, will be closely watched for its impact on both the dollar and wider investor sentiment.
European shares turned positive in choppy trading on Friday after upbeat macroeconomic news on the euro zone, while German bund futures also opened higher. Both markets were awaiting fresh direction from the payrolls numbers.
GOLD EYES KEY CHART LEVELS
From a technical perspective, gold is approaching key levels, according to analysts who study past price movements for clues as to the future direction of trade.
“Having cleared the December 8 high (at 1754), the next resistance is at 1769, which is the 61.8 percent Fibonacci retracement of gold's fall from grace in the last quarter of 2011,” said ScotiaMocatta in a note.
“Gold was strongly rejected at this level in early December. Clearing this level would open up a full retracement back to the September high of 1921.”
Among other precious metals, silver was down 0.2 percent at $34.22 an ounce. The grey metal's ratio to gold - the number of silver ounces needed to buy an ounce of gold - eased back to 51.3 from the high at 57.4 it hit in late December.
Silver was the best-performing of the major precious metals last month, rising more than 20 percent. Silver coin sales under the US Mint's American Eagle programme totalled 6.107 million ounces in January, their highest in a year.
Spot platinum was up 0.1 percent at $1,628.24 an ounce, while spot palladium was up 0.5 percent at $708.72 an ounce. Platinum earlier hit its highest since November 16 at $1,632.50.
Platinum prices are up 16.7 percent so far this year, supported by concerns over output of the metal from major producer South Africa. Natixis said it expects output growth to slow from its estimate of a 6 percent increase in 2011.
“South African producers are suffering from high costs due to lower ore concentration - leading to deeper drilling - and an increase in energy costs,” it said.
“For 2012 we expect output to grow by around 3 percent to 206 tonnes as investment in South Africa and Zimbabwe become operational.” - Reuters