Gold was little changed on Thursday following losses in the past two sessions as strong US jobs data took the sheen off the metal’s safe-haven appeal and investors waited on further clues on the strength of the economy.
Markets were also digesting minutes of the Federal Reserve policy meeting released on Wednesday to gauge the US central bank’s outlook for the pace of its stimulus tapering this year.
Although the minutes showed many Fed officials wanted to proceed with caution in trimming the $85 billion monthly asset purchases, strong US economic data seemed to indicate that the Fed is likely to continue cutting its stimulus.
“The main factor for gold this year is how the Fed is going to go forward with its QE tapering,” said Barnabas Gan, an analyst at OCBC Bank, referring to quantitative easing.
“The outlook for the US economy seems favourable, and gold being a dollar denominated commodity will be sensitive to dollar strength should the tapering continue,” said Gan, who sees a downside risk of $1,150 for gold prices.
Spot gold had edged up 0.1 percent to $1,227.26 an ounce by 0336 GMT, after dipping 1 percent in the previous two sessions.
The dollar hovered at seven-week highs against a basket of major currencies early on Thursday, having risen for a second session after an upbeat private-sector jobs report drove US short-term yields and market rates higher.
A stronger greenback makes gold more expensive for holders of other currencies.
Gold traders are eyeing US weekly jobless claims data expected on Thursday and the more-significant nonfarm payrolls on Friday for clues about economic recovery.
Investor sentiment continued to be bearish towards gold with holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, falling 1.50 tonnes to 793.12 tonnes on Wednesday – the lowest in five years.
On the physical side, premiums on the Shanghai Gold Exchange were steady at $17 an ounce as demand picked up ahead of the Chinese New Year.