Daily Gold Update

Source: Marketwatch

Beijing— Gold futures rose early Friday, pulling other metals with it, as the dollar fell sharply following a weaker-than-expected May jobs report.

Gold for August delivery was last up $8.50 at $642 an ounce on the New York Mercantile Exchange. The contract closed at a six-week low Thursday, marking its third consecutive session of declines, as traders used dollar strength as an excuse to lock in recent gains.

The dollar tumbled after the Labor Department said the economy added just 75,000 jobs in May, less than half the 174,000 expected by economists polled by MarketWatch. Revisions reduced job gains in the past two months by 37,000.

"The U.S. employment report provided the Fed with the unambiguous signal needed for a pause, as payroll growth undershot already-falling expectations, while the work week ticked down, and the hourly-earnings gain was restrained," said economists at research firm Action Economics.

Financial markets reacted sharply on renewed speculation the Federal Reserve may pause in its steady campaign of rate increases, with the dollar hit especially hard.

The dollar was last trading down 0.9% against the yen and 0.9% against the euro. The greenback was flat before the jobs report was released.

"Today's weak jobs report spurred buyers of the yellow metal back into the game after the falloff that some were naive enough to call the end of the commodities boom," said trader Kevin Kerr, editor of Global Resources Trader, a newsletter published by MarketWatch.

"The idea of a fed pause now seems very likely and gold may find renewed interest coupled with the ongoing fears of geopolitical risk as Iran continues to rattle it's sabres."

The permanent members of the U.N. Security Council and Germany came away from a meeting in Vienna late Thursday with an agreement on a package of incentives they intend to offer Iran in an effort to stop it from enriching uranium.

European leaders are expected to present the package, details of which have not yet been made public, to Tehran in the coming day, according to media reports. Diplomats have suggested incentives would include help in developing nuclear power plants and supplies of safely-enriched uranium.

U.S. Secretary of State Condoleezza Rice said in a television interview that Iran needs to respond to the offer within weeks or face penalties. The U.S. would like to impose U.N. sanctions on Iran if it fails to halt its activities but Russia and China, both of which have veto powers on the Security Council, are opposed to such a move.

Russian Foreign Minister Sergei Valvrov said Friday that the Vienna agreement rules out any force against Iran, the BBC reported. Separately, John Negroponte, the head of U.S. national intelligence, told the BBC that Tehran's current program could produce a nuclear bomb within 10 years.

But the first comments from Iran were not promising, with Mohammed Saeedi, deputy head of Iran's Atomic Energy Organization reportedly remaining defiant on his country's plans.

Saeedi told the students news agency ISNA that Iran is "determined to go ahead with its nuclear enrichment work for peaceful purposes," Reuters reported.

"The primary catalyst to this morning's rebound continues to be an intractable Iran that continues to refuse to blink — even in the face of unified international pressure," said Jon Nadler, investment products analyst at bullion dealers Kitco.com.

However, "interestingly, the fact that this time, goodwill and hours are both running out for Iran does not appear to preoccupy traders as intensely as it once did," he said.

Earlier, gold found support from reported comments by a Chinese central bank board member, who said the country should use its foreign-currency reserves — the world's biggest — to buy gold and oil as a hedge against further weakness in the dollar.

Yu Yongding later told Platts that the country is diversifying its reserves but denied the reports in local and international news outlets that he recommends moving aggressively on gold.

Elsewhere in the metals sector, silver was up 21.5 cents at $12.12 an ounce, platinum rose $10.20 to $1,240 an ounce and palladium was up $12.60 at $350 an ounce.

Copper recovered part of its prior-session losses to trade last up 11.4 cents at $3.585 a pound.

On the supply side, gold inventories were unchanged at 7.79 million troy ounces as of late Thursday, according to Nymex data.

Silver supplies fell 398,806 troy ounces to 108.4 million and copper supplies dipped by 66 short tons to 9,478 short tons.

Indexes that track the mining sector were also higher, with the Philadelphia Gold and Silver Index up 1.9% at 144.46. The CBOE Gold Index rose 2.3% to 147.70 and the Amex Gold Bugs stood at 339.52, up 2.3%.