Gold inches higher on short covering, weak U.S. data

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Gold ticked up for a third session on Wednesday, buoyed by short covering following a dip in the dollar and soft U.S. manufacturing data.

FUNDAMENTALS

* Spot gold edged up 0.1 percent to $1,070.60 an ounce by 0036 GMT, after gaining about 1 percent in the past two sessions.

* U.S. manufacturing contracted in November for the first time in three years, sending the dollar sliding from an 8-1/2 month high reached on Monday.

* The weakness in the dollar provided some support for the greenback-denominated gold and an opportunity for investors to cover short positions. Hedge funds and money managers are holding a record net short position in COMEX gold contracts, data on Monday showed.

* Despite the recent gains, the outlook for gold remains bearish due to a looming U.S. rate hike.

* The Federal Reserve is widely expected to raise U.S. rates this month for the first time in nearly a decade.

* Bullion fell to a near-six-year low last month and posted its biggest monthly drop in 2-1/2 years in November as investors believed higher rates could weaken demand for non-interest-paying bullion.

MARKET NEWS

* U.S. stocks closed higher on Tuesday despite mixed U.S. economic data as treasury yields and the dollar declined while oil prices were choppy ahead of an OPEC meeting later this week.

* The U.S. dollar nursed broad losses early on Wednesday, having retreated from a multi-month peak as bulls got cold feet after U.S. manufacturing contracted in November for the first time in three years.

Why OPEC's plan to balance oil markets backfired

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OPEC's plan to shake up the world oil market may have backfired for now. Just a year ago, the Organization of the Petroleum Exporting Countries decided to let market forces determine the price of oil, rather than its own production quotas. 

Conventional thinking then was that the US oil patch would be littered with bankruptcies, and production would collapse. As for Russia, the world's largest energy producer would be forced to cut back production by hundreds of thousands of barrels this year due to both the weakness in oil prices and the impact of Western financial sanctions. 

But the results have turned out very different. Instead of falling off, production increased from where it was last year, and the world is still swimming in oil. The three biggest producers — Russia, the United States and Saudi Arabia — have in fact been adding more than 1 million barrels a day more to the market in the past year.

Strong dollar, U.S. rate hike prospects keep pressure on gold

Gold clung to small overnight gains on Tuesday but was within striking distance of a nearly six-year low, pressured by a robust dollar and a looming U.S. interest rate hike.

FUNDAMENTALS

* Spot gold was little changed at $1,064.66 an ounce by 0036 GMT, after gaining 0.5 percent on Monday.

* But the metal wasn't far from $1,052.46, its lowest since Feb. 2010 hit last week. Bullion also posted its biggest monthly drop in 2-1/2 years in November with a 7-percent decline.

* Investors have been positioning for a U.S. rate hike, expected this month at the Federal Reserve's Dec. 15-16 policy meet, by selling non-interest-paying gold.

* The dollar, on the other hand, was on the cusp of reaching its highest in nearly 13 years against a basket of currencies on Tuesday, piling more pressure on greenback-denominated gold.

* A U.S. payrolls report on Friday will be closely watched for clues about the strength of the economy and its impact on the Fed's monetary policy. A strong number, after a surge in job growth in October, could cement expectations that the U.S. central bank will deliver its first hike in almost a decade.

* Hedge funds and money managers raised their net short position in COMEX gold contracts to the biggest on record in the week to Nov. 24, U.S. Commodity Futures Trading Commission data showed on Monday.


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DATA AHEAD (GMT)

0100 China NBS Non-mfg PMI Nov

0100 China NBS Manufacturing PMI Nov

0145 China Caixin Mfg PMI Final Nov

1445 U.S. Markit Mfg PMI Nov

1500 U.S. Construction spending Oct

1500 U.S. ISM Manufacturing PMI Nov

1830 U.S. Total vehicle sales

U.S. crude ends bearish month with slight losses, ahead of OPEC meeting

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U.S. crude futures inched down on Monday, amid a stronger dollar as investors continue to await Friday's critical OPEC meeting for potential shifts in supply-demand dynamics on global energy markets. On the New York Mercantile Exchange, WTI crude for January delivery traded in a broad range between $41.52 and $42.60 a barrel on Monday, before settling at $41.63, down 0.09 or 0.20% on the day. After jumping above $42 in U.S. morning trading, U.S. crude futures pared earlier gains in the afternoon session reversing territory just before the close. 

Despite a significant rally in late-November, WTI crude futures still closed the month down by roughly 9%. On the Intercontinental Exchange (ICE), brent crude wavered between $44.51 and $45.74 a barrel before closing at $44.58, down 0.27 or 0.59% on the session. North Sea brent futures ended the month with a four-day losing skid, closing November down by approximately 8.5%. Meanwhile, the spread between the international and U.S. domestic benchmarks of crude stood at $2.95, below Friday's level of $3.12 at the close of trading.

Gold poised for worst monthly dip in 2-1/2 years

Gold was trading close to its lowest level in nearly six years on Monday and was poised to record its worst monthly slide in 2-1/2 years on prospects of a U.S. interest rate hike this year.

FUNDAMENTALS

* Spot gold was little changed at $1,057 an ounce by 0028 GMT, after dropping 1.2 percent in the previous trading session. The metal was within striking distance of $1,052.46, the lowest since February 2010, reached on Friday.

* Bullion has lost about 7.5 percent of its value in November, its steepest monthly fall since June 2013.

* The precious metal has fallen out of favour as investors position themselves for the first U.S. rate hike in nearly a decade. The Federal Reserve is expected to raise rates at its next policy meeting in December.

* Investors believe gold, as a non-interest-paying asset, will take a hit to demand from higher rates as the dollar gains.

* The greenback is already trading near an eight-month high, and further strength could hurt dollar-denominated gold.

* Assets in SPDR Gold Trust, the world's top gold-backed exchange-traded fund, fell 0.14 percent to 654.80 tonnes on Friday, the lowest since September 2008.

* For trading cues this week, bullion traders would be focussed on the U.S. nonfarm payrolls report due on Friday. A strong jobs report could seal the case for a rate hike at Fed's Dec. 15-16 meeting.

* The European Central Bank policy meeting on Thursday will also be eyed for impact on the currency markets. The ECB is widely expected to ease policy.

* Elsewhere, gold miners in Australia, emboldened by a weakening currency, have been increasing production in the face of a global rout in the precious metal, figures released on Sunday showed.

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