Gold inches up, ignores personal income data

By Frank Tang and Veronica Brown

NEW YORK/LONDON (BestGrowthStock) – Gold edged higher in a tight range on Monday, starting its fifth straight week in positive territory, with dealers looking to key U.S. jobs reports later this week for clarity on the economy’s health.

The metal largely ignored the U.S. personal income report, showing consumer spending rose at the strongest pace in four months in July, offering hope consumers will be able to keep contributing to a modest recovery.

However, the core PCE index, the Federal Reserve’s favorite inflation gauge, rose only 0.1 percent, rekindling deflation talk, which is bearish for gold’s investment appeal.

Spot gold was at $1,236.75 by 10:55 a.m. EDT (1455 GMT) versus $1,235.70 late in New York on Friday. Trade was fairly muted in Europe, with UK markets closed for a public holiday. U.S. gold futures for December delivery rose 20 cents to $1,238.10 an ounce.

On Friday, gold trimmed gains after Fed Chairman Ben Bernanke said the economic recovery had weakened more than expected and the U.S. central bank stood ready to act if necessary to spur growth.

Bullion dealers said the extent of the world’s biggest economy’s ability to generate jobs will be a key driver for prices, culminating in Friday’s employment figures, and provide direction for gold.

“This coming week will clearly indicate where the U.S. stands economically — employment is key. Only depending on the data will gold get a clear trend,” said Pradeep Unni, senior analyst at Richcomm Global Services, referring to U.S. ADP private sector employment figures on Wednesday and the U.S. non-farm payrolls report on Friday.

Economists polled by Reuters estimated that unemployment rose to 9.6 percent in August from 9.5 percent in July and that private-sector employers added 42,000 jobs to their payrolls after adding 71,000 in July.

Robust employment readings could make it hard for gold prices to retest the recent two-month high at $1,244 an ounce, but Unni said discussions about further quantitative easing after last week’s speech from U.S. Fed Chairman Ben Bernanke would keep prices supported at the lower levels.

Barclays Capital said it was looking for the August FOMC minutes on Tuesday to show heightened concern about the recovery, and a lower growth forecast for 2010.

“We would not be surprised to see some discussion of potential policy alternatives,” Barcap said in a note to clients.

QE2?

Gold prices got a leg up on Friday after comments from Ben Bernanke raised the prospect of further quantitative easing and the possibility of inflationary pressures.

Further quantitative easing could potentially see gold heading back toward its record high at $1,264.90 an ounce seen in June, analysts said.

Commerzbank noted that speculative financial market players had expanded their net long positions for the fifth week in succession in the week ended August 24, with contracts rising to their highest level since the end of June.

“This shows that gold is still very popular, both with financial investors and longer-term oriented investors,” the bank said.

In other metals, silver firmed alongside gold to $19.07 an ounce, against Friday’s late price at $19.03, bringing the metal closer to last week’s two-month high of $19.32.

Platinum stood at $1,528 an ounce compared with $1,530.50 previously. Palladium was at $498.50 against $501 quoted late on Friday in New York.

(Additional reporting by James Regan in Sydney; Editing by Lisa Shumaker)

Gold inches up, ignores personal income data