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Gold futures - Weekly outlook: January 7 - 11

CommoditiesJan 06, 2013 06:30AM ET
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Investing.com - Gold futures fell to the lowest level since mid-August early Friday, before trimming losses following the release of tepid U.S. non-farm payrolls data, which suggested the Federal Reserve will continue its quantitative easing program in the near term.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery dropped 1.1% on Friday to settle the week at USD1,655.85 a troy ounce.

Gold prices fell to USD1,626.05 earlier in the session, the lowest since August 21, after the minutes from the Federal Reserve Open Market Committee's December meeting published late Thursday indicated that the central bank could end its bond-buying program earlier than expected.

Moves in the gold price over the past year have largely tracked shifting expectations as to whether the U.S. central bank would pump more money into the financial system.

Futures prices ended the holiday-shortened week with a modest 0.3% loss, the sixth consecutive weekly decline.

Gold prices were likely to find support at USD1,626.05 a troy ounce, Friday’s low and a 19-week low and resistance at USD1,690.55, Thursday’s high.

Gold prices fell sharply after the minutes from the Fed’s most recent policy-setting meeting showed several Fed officials thought the central bank would be able to slow or stop its bond purchases well before December 2013.

The Fed’s quantitative easing program is viewed by many investors as a major source of liquidity that weakens the U.S. dollar and helps support prices of commodities and other hard assets, including gold.

But futures recovered from the lows after the U.S. Department of Labor said the economy added 155,000 jobs in December, easing from an upwardly revised increase of 161,000 in November.

The unemployment rate held steady at 7.8%, suggesting that the recovery in the labor market may be slowing.

The still-high unemployment rate will keep the Fed’s asset-purchase program in place for the indefinite future. The Fed’s December minutes said monetary policy will remain accommodative “at least as long” as the jobless rate remains above 6.5%.

The U.S. dollar moderated strong gains following the release of the lackluster U.S. employment data.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, retreated from the session high of 80.99 to settle the week at 80.61.

Gold prices often move inversely to the U.S. dollar, as gold becomes less expensive for buyers using other currencies.

In the week ahead, investors are likely to remain focused on U.S. political wrangling over fiscal policy.

U.S. lawmakers passed a compromise bill to avoid the fiscal cliff last week, however investors remained jittery over the longer term outlook, with negotiations on raising the U.S. debt ceiling still to come in February.

Market participants will also be anticipating monetary policy decisions by the European Central Bank and the Bank of England.

Elsewhere on the Comex, silver for March delivery fell 1.6% on Friday to settle the week at USD30.22 a troy ounce. Despite Friday’s losses, silver futures added 0.5% on the week.

Meanwhile, copper for March delivery declined 0.5% Friday to close the week at USD3.700 a pound. Copper prices climbed 3% on the week.

Gold futures - Weekly outlook: January 7 - 11

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