The nonfarm payrolls data is heading for its longest weekly losing streak in more than six months as equities firmed and optimism grew about the U.S. economy.
Investors in gold, often seen as a hedge against economic uncertainty, are eyeing the U.S. jobs report – due later on Friday – to gauge the strength of the economy and any potential impact on the Federal Reserve’s stimulus measures.
A weak report could boost gold’s appeal as a safe-haven, while a strong report could prompt speculation that the Fed will lift rates earlier than previously expected.
Median forecasts are for a rise of 200,000 in payrolls.
“If payrolls fall short of the 200,000 mark that would potentially support gold prices. Though it is unlikely prices will break above 1,300 US dollars,” said Joyce Liu, an analyst at Phillip Futures.
“But if it’s a strong report, we will definitely see some downside and potentially break below 1,276 US dollars.”
Spot gold slipped 0.05 per cent to 1,286.39 US dollars an ounce by 0708 GMT. The metal is down 0.5 per cent for the week, on track for a third straight weekly loss. That would be its longest weekly losing stretch since August-September.
Prices were trading in a tight 3.86 US dollars range – the smallest trading band since 25 December 2013.
Liu said any support from physical demand, which could pick up at lower prices, would be offset by technical bearishness.
Physical demand has, in fact, weighed on prices as buying interest from top consumer China has dropped off considerably.
Shanghai prices, which were at a premium of over 20 US dollars an ounce to spot prices at the beginning of the year, are now at a discount of about 2 US dollars.
Banks in China have been importing less gold over the past month on waning demand, while cheaper prices at home due to a softer yuan also curbed overseas purchases of the precious metal, banking sources and traders said.
In No. 2 buyer India, the central bank has indicated that it is considering removing some of the curbs on gold imports – a move that could potentially ease premiums and boost demand.
A pick-up in buying from India, which was until last year the biggest gold consumer, could provide some support to gold prices.
Among other precious metals, platinum and palladium were heading for weekly gains on supply worries.
Strikes in South African mines have forced platinum producers such as Lonmin to declare force majeure with some contractors.
(WATCH VIDEO: The effects of platinum mining strikes on S.Africa’s economy)
Palladium supply fears are also being fuelled by geopolitical tensions in Russia, the top producer of the metal.
(WATCH VIDEO: Reflecting on the Russia/Ukraine saga)