[SINGAPORE] Gold steadied on Friday ahead of crucial US employment data, but was set to post its biggest weekly loss in almost two months after steep gains at the start of the year.
A strong US jobs number for January would strengthen expectations for the Federal Reserve to hike interest rates by mid-year, denting the appeal of non-interest yielding assets such as gold. But weaker data could buoy bullion prices. "A significantly lower job creation could support gold if it results in changes in the timing of Fed rate-hike expectations," said HSBC analyst James Steel.
US nonfarm payrolls are forecast to have increased by 234,000 last month after rising by 252,000 in December, according to a Reuters poll of economists. That would be the 12th straight month of job gains above 200,000, the longest streak since 1994.
Spot gold was nearly flat at US$1,264.55 an ounce by 0149 GMT. The metal has lost 1.4 per cent so far this week, which would be its largest fall since the week ended Dec 19.
Gold gained 8.4 per cent in January, its biggest monthly rise in three years, helped by a sharp slowdown in US fourth-quarter economic growth.
US gold for April delivery edged up 0.2 per cent to US$1,265.20 an ounce.
Amid market expectations of still strong US jobs creation in January, the data is unlikely to be a game changer, Mizuho Bank said, citing wild swings in oil prices as potentially the main variable in the Fed's interest rate plan. "For one, stubborn downside in inflation and an elevated US dollar because of easing elsewhere could stall the Fed's rate hike plans," the bank said in a note. "This is more so if evidence of shale activity slowdown with discernible impact on jobs creation starts to come through." The gold market was also keeping one eye on Greece where increased uncertainty this week has supported prices.
Greece's leftist finance minister clashed openly with his powerful German counterpart on Thursday as Athens' borrowing costs leapt and bank shares plunged following the European Central Bank's decision to stop funding the country's lenders.
Elsewhere, holdings at SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 24.86 million ounces on Thursday, the highest since September.