Gold Prices Edge Higher

Gold prices edged up on Wednesday as market participants in U.S. returned to the floor resulting in higher trading volume following two days of pause caused by the destructive Hurricane Sandy; nevertheless, no major gains are expected in the short term as bullion investors will remain wary ahead of deluge of economic data in next two days and the outcome of U.S. presidential elections.

U.S. gold futures for December delivery gained 0.4% or $7 an ounce to settle at $1,719.10 an ounce on the Comex division of New York Mercantile Exchange while spot gold was gaining 0.7% at $1,720.90 an ounce. Earlier on Wednesday, U.S. gold futures hit a session high of $1,726.60 an ounce but as the U.S. dollar pared its losses, metal’s price retreated.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.55% higher at $166.86.

The ICE dollar Index, a gauge on U.S. unit’s performance against a basket of six major currencies, rose to 79.902 on Wednesday from 79.942 on Tuesday in late night North American trading.

In October gold slumped 2.8%, a first monthly loss since May. Earlier on October 5, bullion prices peaked at $1,795.69 an ounce but metal’s failure to cross the key resistance level of $1,800, triggered a technical weakness, resulting in investors cutting short their bullish positions.

Also doubts over global macroeconomic stability dented metal’s inflation hedge appeal, prompting investors to stay in sidelines while falling quarterly earnings made investors to close positions in gold to cover losses incurred from equity and commodity markets.

Now, all eyes will be focused on U.S. Labor Department’s monthly non-farm payrolls data for October, scheduled to be released on Friday. As Federal Reserve’s latest round of quantitative easing is centered on the labor market, any weakness or recovery in the employment figures will provide a fair idea over how long the central bank will continue with its economic stimulating measures.

A poll conducted by Reuters showed that the U.S. economy created 125,000 jobs in October while unemployment level is expected to be at 7.9% compared to last month’s 7.8%.

While non-farm payrolls data are expected to keep bullion investors on sidelines, the upcoming U.S. presidential elections will also keep lid on gold’s gains, believe analysts. It is believed that gold will continue to hover in the tight range of $1,700-$1,720 an ounce in the near term.

“Do not expect any major fireworks unless we close above 1730 or until after non-farm payrolls on Friday,” commented Ole Hansen, Vice President at Saxo Bank in his research note.

Echoing the similar sentiment, David Jollie, a precious metal analyst at Mitsui Precious Metals said to Reuters that bullion will be traded in a very narrow range in the near term due to ambiguity surrounding the U.S. presidential elections. “People are not keen to add risk to their portfolios ahead of that,” added Jollie.

In a research note, strategists at KBC Bank in Brussels wrote, “It may take an event such as Friday’s U.S. nonfarm payrolls report to break gold out of the relatively narrow trading range of $1,700 to $1,720 an ounce seen over the past five sessions.”

“The clear downtrend from earlier in the month has now been replaced by this consolidation phase. But the possibility of another attempt on the downside certainly cannot be ruled out, especially with U.S. nonfarm payrolls coming up and the U.S. elections looming,” said UBS in its daily market report.

Meanwhile, in physical market side, the demand for the yellow metal is expected to pick-up in the wake of approaching Hindu festival of Diwali, an occasion considered auspicious to buy gold.

Moving onto some other precious metal markets, silver futures edged up 50 cents, or 1.6%, to close at $32.32 an ounce.

January palladium futures climbed $13.65 an ounce, or 2.3%, to end the day at $609.80, and December platinum futures leaped $23.40, or 1.5%, to settle at $1,577.50 an ounce.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.