Gold stuck near 2010 low as data backs Sept Fed rate hike view

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Gold strug­gled to pull away from a 51/2-year low on Thurs­day af­ter more up­beat U.S. eco­nomic data bol­stered prospects that the Fed­eral Re­serve could lift in­ter­est rates as soon as next month.

A surge in U.S. ser­vices in­dus­try ac­tiv­ity to a near-decade high sug­gested solid eco­nomic mo­men­tum that strength­ens the case for a U.S. in­ter­est rate hike this year, the first since 2006.

In­vestors will be eye­ing U.S. non­farm pay­rolls data due on Fri­day, with econ­o­mists polled by Reuters pre­dict­ing em­ploy­ment in July to have in­creased at the same pace as June's 223,000 rise. "If it's in ex­cess of 250,000, I think that will seal the deal for a Septem­ber rate hike," said Howie Lee, an­a­lyst at Phillip Fu­tures in Sin­ga­pore.

A strong U.S. em­ploy­ment re­port could send gold be­low $1,080, he said. "(That) ap­pears to be a level that many traders have put their stop-loss in be­cause ev­ery time it breaches that level there's a swift de­cline," said Lee, adding bul­lion could fall as low as $1,060.

Spot gold was up 0.1 per­cent at $1,086.20 an ounce by 0633 GMT. The me­tal has been stuck be­low $1,100 since breach­ing that sup­port level af­ter a deep rout in late July that pushed it as far as $1,077, its weak­est since Fe­bru­ary 2010. U.S. gold for De­cem­ber de­liv­ery was flat at $1,085.70 an ounce.

Ex­pec­ta­tions that the Fed could in­crease rates at its next pol­icy meet­ing in Septem­ber grew louder this week af­ter At­lanta Fed­eral Re­serve Pres­i­dent Dennis Lock­hart said only a "sig­nif­i­cant de­te­ri­o­ra­tion" in the U.S. econ­omy would make him not sup­port a rate hike next month. But Fed Gover­nor Jerome Pow­ell said pol­i­cy­mak­ers had not yet de­cided whether to raise in­ter­est rates next month, adding more re­cent em­ploy­ment data had been mixed. A loom­ing hike in U.S. in­ter­est rates dims the ap­peal of non-in­ter­est yield­ing gold, in­stead pulling more funds to the dol­lar which on Wed­nes­day hit its high­est since April ver­sus a bas­ket of cur­ren­cies.

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