Gold pauses after rally sparked by U.S. data

Mon Jun 4, 2012 10:51am EDT
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By Jan Harvey

LONDON (Reuters) - Gold eased on Monday as losses on wider markets prompted some investors to cash in gains from the metal's biggest one-day price rise in over three years, but it held near its highest in almost a month on speculation about U.S. monetary easing.

Gold broke ranks with riskier assets on Friday to surge 4.3 percent despite a sell-off elsewhere after a surprisingly weak U.S. payrolls report stoked talk that further stimulus measures may be necessary to reignite growth.

"We had a non-farm payrolls number that came in far below expectations, and also a rise in the unemployment rate," Peter Fertig, a consultant at Quantitative Commodity Research, said. "That could give some incentive for the voting members of the Federal Open Market Committee (to act)."

A fresh round of quantitative easing, which basically translates to printing money, would likely undermine the dollar and confidence in the wider currency markets, benefiting gold.

That could provide scope for further gains after Monday's pause, Fertig said. "Given the jump we had on Friday in gold, it's quite normal to see some consolidation," he said.

Spot gold was down 0.3 percent at $1,620.89 an ounce at 10:16 a.m. EDT (1416 GMT). Its rally on Friday took it to a high of $1,629.41, its highest since May 8.

Worries over the pace of the U.S. recovery, the euro zone debt crisis and the softer rate of Chinese growth combined on Monday to pressure assets seen as higher risk. Wall Street stock markets gave up early gains after weak sessions in Europe and Asia, where Tokyo stocks hit a 28-year low. .EU <MKTS/GLOB>

Other commodities also fell, with oil and Shanghai copper hitting multi-month lows on Monday and some Chinese commodities reaching their downside limits. <O/R> <COM/WRAP>   Continued...

An employee arranges gold jewellery in the counter as her arm is reflected in the mirror at a gold shop in Wuhan, Hubei province August 25, 2011. The Shanghai Gold Exchange will raise margin requirements for its gold forward contracts for the second time this month to 12 percent starting on Friday, in a move aimed at curbing excessive risk-taking following the rapid rally in gold prices. REUTERS/Stringer