New York/London: Gold dropped 1.7 per cent on Friday, notching its biggest one-day fall in more than a month, as surprisingly strong US jobs data raised the prospect that the Federal Reserve may soon decide to temper its bond-buying stimulus.
A flurry of sell orders in heavy volume sent US gold futures over $10 (Dh36.70) lower just minutes after the October nonfarm payrolls data, setting a weaker tone for the rest of the day. A similar move in gold futures was also seen after Thursday’s strong GDP report.
Rallying US equities and a soaring US dollar sent gold to a three-week low, as bullion underperformed silver and platinum group metals. The S&P 500 index rose 1 per cent on better economic hopes, while the dollar index was up 0.5 per cent.
US job growth unexpectedly accelerated in October, with employers adding 204,000 jobs, while 60,000 more jobs were created in September and August than previously reported, the Labour Department said.
“Those payroll numbers made the folks who buy gold nervous as they did not go in the direction they wanted to see, suggesting that tapering could be back on the table,” said Axel Merk, chief investment officer at California-based Merk Funds, which have $450 million assets under management.
Spot gold was down 1.7 per cent at $1,285.06 an ounce by 3.20pm EST (2020 GMT). The metal fell 2.2 percent for the week, its second consecutive weekly loss.
US Comex gold futures for December settled down $23.90 at $1,284.60 an ounce, with trading volume about 5 per cent above its 250-day average, preliminary Reuters data showed.
Gold has lost about a fifth of its value this year due to fears the Fed would begin cutting back its $85 billion monthly bond purchases. The metal’s inflation-hedge appeal has been burnished by the bond purchases and low interest rates.
“At the moment, the market is looking at underlying growth and can see how the US is accelerating and that very simply leads to tapering one way or another, which is obviously not bullish for gold,” BofA Merrill Lynch analyst Michael Widmer said.
The metal had managed a rebound in recent weeks after a prolonged budget battle in Washington in October led investors to believe the Fed may not start withdrawing support for the economy and possibly push the tapering into next year.
However, after Friday’s strong jobs report, some economists said it would be unwise to rule out chances the Fed could curtail its bond-buying as soon as its next meeting in December.
Among other precious metals, silver was down 1 per cent at $21.43 an ounce. Platinum fell 0.6 per cent to $1,439.49 an ounce, while palladium dropped 0.4 per cent to $755.47 an ounce.