LONDON, Aug 9 (Reuters) – Gold prices kept to tight ranges on Monday in Europe as the market digested Friday’s run up to two-week highs above $400/oz following much weaker-than-expected U.S. jobs data.
Traders and analysts felt the market had potential for further gains, although volatility would remain high given the low liquidity levels.
“It was fairly significant what happened on Friday. I believe more buying is going to come in soon,” one trader said.
“I think we could head up to a $405-$415 range, although a lot depends on what the CTA’s (commodity trade advisors) do.”
By 0916 GMT, spot gold
Traders called for gold to trade in narrow ranges ahead of Tuesday’s Federal Open Market Committee interest rate meeting, with an announcement due at 1815 GMT.
Policymakers are still expected to raise interest rates by a quarter percentage point despite Friday’s job numbers, although analysts said the latest data called into question the pace of subsequent rate hikes.
Gold peaked at $400.75 on Friday, when July U.S. payrolls data rose by just 32,000, far below market expectations for a rise of between 200,000 and 250,000 jobs.
Not only was gold supported by a positive technical picture, but renewed global security fears, the weaker dollar, high oil prices and weak equity markets, were also attracting investors to put cash back into the hard asset.
Analysts noted that the latest CFTC Committments of Traders report showed the funds were still underweight gold on the New York COMEX futures market.
“The net long position … was just 6.4 million ounces, against a 12-month range from a low of 4.9 million to a high of 19.6 million ounces,” Alan Williamson, metals analyst with HSBC, said in a daily report.
“There remains considerable upside potential for the funds to add to positions.”
Platinum was still threatening to break out of its two-month old range of $836-770, but it again failed to crack resistance at $836 during Asian trading, where it is currently most active.
Source: FX Street