December 6, 2013 / 11:42 AM / 6 years ago

PRECIOUS-Gold edges up after whipsawing, upbeat US jobs data in focus

* US payrolls beat forecasts, fueling talk of Fed tapering
    * After early tumble, some cover short positions
    * Unusually heavy options trade on Thurs indicates bullish
bets
    * Coming up: U.S. wholesale inventories Tuesday

 (Adds option trade, updates market activity)
    By Frank Tang and Veronica Brown
    NEW YORK/LONDON, Dec 6 (Reuters) - Gold trimmed gains to end
slightly higher on Friday, as better-than-expected U.S. jobs
data reinforced fears that the U.S. Federal Reserve will rein in
its stimulus program, ending a brief flurry of short covering by
traders who had bet on lower prices.
    Behind the subdued close was a volatile day's trade with
prices whipsawed first by upbeat jobs data that sent prices
close to five-month lows and then by short covering that sent
the market up 1 percent after holding technical support.
    As concerns about imminent tapering of the Fed's stimulus
after U.S. data showed the unemployment rate hit five-year lows
returned, the gains faded. 
    "Now definitely a lot of people are thinking ... more
aggressive tapering could be on the table," said Frank McGhee,
head precious metals dealer at Chicago commodities brokerage
Alliance Financial LLC. 
    "The metals are in a state of flux until we have more
certainty about what actions the Fed's going to take".   
    Spot gold edged up 0.4 percent at $1,229.06 an ounce
by 3:51 p.m. EST (2051 GMT), moving between a broad daily range
between $1,211.80 and $1,243. 
    For the week, gold prices were down about 2 percent. Gold
dropped sharply on Thursday as data showed the U.S. economy grew
faster than estimated in the third quarter. 
    U.S. gold futures for February delivery
underperformed spot prices, settled down $2.90 at $1,229.
    For the most of the New York session, bullion climbed in
tandem with the equity markets, a rare positive link between the
two this year. Gold prices have plummeted amid fears that the
Fed will tapering its stimulus this year even as the stock
market kept rallying. 
    Comex floor option traders said unusually heavy trading of
out-of-the-money options - Comex January puts at $1,200 per
ounce and August $1,700 calls - on Thursday suggested some
investors had bet on even higher prices on the jobs data.
    Even so, traders had built up a massive short position
earlier in the week in anticipation of strong U.S. jobs data.
    On Friday, relatively thin trading made the market's moves
more volatile, traders said. Volume was in line with its 30-day
moving average, preliminary Reuters data showed.
    
    FED WATCH
    Investors will now turn their focus to the Fed's December
policy meeting on Dec. 17-18 for an indication of when the U.S.
central bank may start to trim its $85 billion monthly
bond-buying program, which has underpinned gold's rise in recent
years.
    Among other precious metals, silver took its cue from gold,
rising 0.6 percent on the day to $19.44 an ounce.
Platinum fell 0.2 percent to $1,354.74, while palladium
dropped 0.1 percent to $731.50.
    The platinum:palladium ratio - or the number of palladium
ounces needed to buy an ounce of platinum - fell to its lowest
in 11 years on Friday to around 1.8. 
    Strong demand from the auto sector and an unpredictable
supply from above-ground stocks suggest a physical shortage
could take place in the palladium market as early as next year,
an executive at the Russia's Norilsk Nickel said on
Thursday. 
 3:51 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1229.00  -2.90  -0.2  1210.10 1245.00  165,997
 US Silver MAR  19.523 -0.047  -0.2   19.165  19.785   38,389
 US Plat JAN   1356.30  -7.20  -0.5  1345.00 1367.00    8,458
 US Pall MAR    736.15  -0.70  -0.1   725.00  742.80    3,456
                                                              
 Gold          1229.06   4.56   0.4  1212.55 1243.00         
 Silver         19.440  0.110   0.6   19.260  19.760
 Platinum      1354.74  -3.25  -0.2  1354.25 1364.75
 Palladium      731.50  -0.63  -0.1   729.00  740.00
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        177,235   178,258   187,934     19.67   -0.91
 US Silver       43,350    61,597    57,652     29.38    0.81
 US Platinum      9,900     9,944    12,505     16.85    0.55
 US Palladium     3,481     8,197     5,949     19.57    0.56
                                                              
    

 (Additonal reporting by A. Ananthalakshmi in Singapore; editing
by David Evans, Jane Bairdvinc and Marguerita Choy)
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