The price of gold edged $10 per ounce lower Monday morning in what dealers called "dull, thin" trade following Friday's sharp jump on U.S. jobs data.
A surge in Asian share prices – attributed to Tokyo winning the 2020 Olympics bid, plus official news of 7% annual growth in China's exports and imports in August – failed to lift European stock markets.
Gold dropped back to $1,382 as commodities also fell with major European government bond prices.
Silver lost 1.5% from Friday's finish, reached after weaker-than-expected U.S. jobs data saw the precious metal regain the previous day's near-4% loss.
"Gold shot up over $30 as a result," notes Mitsubishi strategist Jonathan Butler, "as expectations of significant QE tapering were pushed out beyond September. "If gold successfully clears the $1,400 level, the next technical stop is around $1,435."
But "with a lot of analysts calling for tapering to start in September," reckons broker Marex Spectron, "this will limit the upside [in silver and gold prices]. "If it wasn't for the Syrian situation, we would be lower."
Pointing to last week's peak of 3% in 10-year U.S. Treasury yields, "Gold [had] felt some pressure from rising interest rates," says Edward Meir, writing for brokers INTL FC Stone.
Thanks to conflicting U.S. data, "Confusion will likely prevent gold from weakening substantially over the course of this week," he added, "but we suspect that the selling should intensify after the Fed meeting is out of the way."
"Heightened geopolitical tensions regarding Syria contributed to gold's recent strength," agrees Barclays' analyst Suki Cooper, warning gold investors that "our economists believe [Friday's US non-farm payrolls] report was sufficient to greenlight a tapering of Fed asset purchases this month."
Fresh from the G20 summit of developed and emerging-market economies in St.Petersburg, IMF director Christine Lagarde asked the U.S. Fed in comments at the weekend to consider the global impact of any tapering of its QE program.
Thanks to pressure on emerging-market currencies, "There is a lack of buyers in the Treasury market," Bloomberg today quotes a trader at Scotiabank, because emerging-market central banks are selling U.S. bonds "to back up their currencies" on the FX market.
However, "as U.S. yields continue to rise," notes Japanese trading house Mitsui's Singapore team, "so too do the servicing costs of the U.S. debt. [Gold] will likely hold above $1,350" in the near term.
Alongside a bullish bet on base metals, commodity analysts at U.S. investment bank JPMorgan advised clients on Friday to close their "underweight [position] in precious metals" because of "positive momentum, cleaner positions and the impending start to the U.S. debt ceiling negotiations."
Hedge funds and other professional speculators in the U.S. derivatives market last week grew their bullishness on gold to the highest level since end-March.
The group's "net long" position of bullish minus bets rose 1.1% to equal 397 tonnes, according to the weekly commitment of traders data from U.S. regulator, the CFTC.
That rise came primarily thanks to another drop in the number of bets that gold would fall – now cut below 40% of July's multi-decade peak.
Private investors trading gold futures and options meantime grew their net long as a group to the highest level since April 16 – the spring's first gold-price crash, and the worst two-day drop in 33 years.
Compared to their five-year average, traders with so-called "unreportable" positions now hold 7.6% more bearish bets on U.S. gold derivatives. Larger speculators on the other hand now hold 37.6% more bearish contracts than their five-year average.
Even so, "We believe the risks are still skewed to the downside" for gold prices, says a note from Swiss investment bank – and London market maker – UBS today, "especially given how much shorts have covered over the past two months. "There is now ample room for fresh selling should QE-tapering be confirmed."