Gold Eases Ahead of ECB, Jobs Posted by James Randolph on September 05, 2012
Gold eased Wednesday as investors looked to an important meeting of the
European Central Bank and the U.S. jobs report, but remained near the six-month high
achieved in the trading session prior.
Expectations have largely been the Mario Draghi, President of the European
Central Bank, would unveil a bold plan aimed at tackling the debt crisis in the Eurozone
at the ECB meeting on Thursday, but reports of disputes between policymakers over the
terms of the deal have raised doubts in the minds of investors over how bold and how
detailed the announcement will actually be.
Recent weak data from both the U.S. and the European Union have given more
weight to the perception of a need for accommodative monetary policy. The dovish
stance on monetary policy is a possible instigator for inflation and has been very bullish
for the gold market.
The latest data out of the Eurozone indicates the bloc has likely slipped back
into a recession in the current quarter as the private sector contracted for a seventh
straight month and the economic crisis has spread to the previously stalwart economy in
The August composite PMI, a measure of manufacturing and services together,
dropped to 46.3 after being revised down from a flash reading at 46.6. July’s measure
read 46.5. Any reading below 50 indicates contraction.
Data out of the U.S. on Tuesday indicated that manufacturing activities contracted
at the sharpest rate in over three years during the month of August, buttressing sentiment
that the Federal Reserve could take action in the near future to stimulate the economy.
The spot price of gold drifted down 0.37 percent to $1,687.89 per troy ounce by
noon in London trading. U.S. gold drifted 0.25 percent to $1,692 per troy ounce.
Federal Reserve Chairman Ben Bernanke’s comments last week on the serious
condition of the U.S. labor market has kept the door to stimulus measures open in the
minds of U.S. investors and contributed to bringing the spot price of gold up to $1,698.45
per troy ounce on Tuesday, the highest level in nearly six months.
Investors anticipate quantitative easing as a boon to the market after the first two
rounds of the fiscal stimulus have been a driver in the gold price doubling in the past four
Jesper Dannesboe, a senior commodity strategist at Societe Generale, said the
market does expect something from the Fed, but probably not a massive quantitative
easing. He believes the ECB will have a greater impact, as it will prevent Spanish and Italian
yields from skyrocketing.