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Gold holds gain after dismal May as investors weigh rate outlook

Wednesday, June 1, 2016 - 14:14
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Gold held the first advance in 10 days as investors looked to the release of US data this week, including monthly payrolls, that'll shape the thinking of Federal Reserve policy makers on whether to raise interest rates in the months ahead.

[SINGAPORE] Gold held the first advance in 10 days as investors looked to the release of US data this week, including monthly payrolls, that'll shape the thinking of Federal Reserve policy makers on whether to raise interest rates in the months ahead.

Bullion for immediate delivery traded at US$1,214.63 an ounce at 12.59pm in Singapore from US$1,215.32 on Tuesday, when the metal rose 0.9 per cent, according to Bloomberg generic pricing. The metal lost 6.1 per cent in May, the biggest monthly drop since November.

Gold's dismal performance last month trimmed the year's rally to 15 per cent with investors parsing data and comments from Fed leaders to gauge the likelihood of tighter policy.

The odds of a rate increase in June or July climbed along with the dollar in May, hurting bullion which doesn't pay interest.

The Fed's Beige Book, a survey of economic conditions is due later on Wednesday, followed by non-farm payrolls on Friday. Fed Chair Janet Yellen is due to speak in Philadelphia on June 6.

"Most investors will be watching Yellen's speech closely next week to find out if the Fed will raise interest rates," Brian Lan, managing director of Singapore-based GoldSilver Central, said by e-mail. "Till then, we don't expect much movement in the prices unless the upcoming data release on Wednesday and Friday will have some surprises."

Tuesday's rise followed figures that showed US consumer confidence unexpectedly fell while manufacturing gauges weakened.

"Gold prices lifted for the first time in 10 days as the market chose to focus on the weaker side of US data," Australia & New Zealand Banking Group said in a report, noting that US manufacturing indicators disappointed.

China's official factory gauge for May released Wednesday remained above the dividing line that signals improving conditions for a third month, adding to recent evidence of stabilisation in the world's second-largest economy.

In China, bullion of 99.99 per cent purity added 0.5 per cent to 258.25 yuan a gram (S$1,678 an ounce) on the Shanghai Gold Exchange.

Holdings in gold-backed exchange-traded funds were little changed at 1,842.9 metric tons as of Tuesday, data compiled by Bloomberg show.

Silver was little changed at US$16 an ounce after a 10 per cent slump in May, the biggest monthly decline since September 2014.

BLOOMBERG