Gold Ends Near Flat as Traders Mull Fed, ECB Monetary Policy

New York (June 6)  Gold prices ended Friday nearly unchanged, after a volatile day that saw prices swing between gains and losses as investors weighed the effect of stronger U.S. employment data against a more accommodative stance from the European Central Bank.

Gold for August delivery, the most active contract, settled 80 cents, or 0.1%, lower at $1,252.50 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold ended the week up 0.5% after prices got a boost from the ECB's decision Thursday to cut its main lending rate. The central bank also dropped the rate on bank deposits to minus 0.1%, thereby charging banks for keeping their money with the ECB.

Gold prices tend to rise during periods of accommodative monetary policy, as investors who worry that such programs could erode the value of their wealth or raise inflation often buy the precious metal as a hedge. However, gold can struggle to attract investors during periods of a more hawkish monetary stance.

On Friday, gold prices fell after the Labor Department said the U.S. economy added 217,000 new jobs in May. This bested economists' forecasts of a 210,000 increase.

The stronger employment report pointed to continued economic recovery and reaffirmed investor expectations that the Federal Reserve would curtail its stimulus program by the end of this year, clearing the way for higher interest rates.

"The Fed is not going to stop winding down stimulus; they've got employment picking up, and the stock market is going up," said Ira Epstein, director of the Ira Epstein division with the Linn Group.

But gold prices swung between gains and losses for some time before turning lower, a sign that the employment report wasn't robust enough to dictate direction to the market, said Frank McGhee, a head precious-metals dealer with Integrated Brokerage Services in Chicago.

Some brokers also said the continued improvement in the labor market is turning up some investors' expectations of inflation and making them give gold a second look.

"The next thing you see after job growth is wage growth, and that bodes well for inflation," said Adam Klopfenstein, a senior market strategist with Archer Financial Services in Chicago.