Gold falls on US jobs figures
London (Dec 7) Gold futures have fallen as a blockbuster US employment report prompts investors to bring forward their expectations for tighter US monetary policy and bolstered the US dollar.
The most actively traded contract, for February delivery, fell $US17.30, or 1.4 per cent, to settle at $US1,190.40 a troy ounce on the Comex division of the New York Mercantile Exchange.
The US economy added 321,000 new jobs in November, the strongest pace of hiring in nearly three years. The data, which beat forecasts of a 230,000 increase, puts 2014 on track for the best year of job creation since 1999.
Gold prices slumped to $US1,186.40 an ounce as investors sold the haven asset in reaction to the jobs data. Investors say evidence of continued recovery in the US labour market augurs a shift to tighter monetary policy by the Federal Reserve, a move that would be a burden for gold prices.
"There's no flight to quality necessary in this type of environment, and it speeds up thoughts that the Fed is going to continue with planned tightening next year," Adam Klopfenstein, a senior market strategist with Archer Financial Services in Chicago, said.
Gold is seen by some investors as more likely to keep its value than stocks, Treasurys or cash during periods of high inflation or economic uncertainty. But as the outlook for the US brightens, investors see less need to protect their wealth and are more comfortable taking on risk.
Moreover, gold prices are expected to struggle as the Fed embarks on raising interest rates. The precious metal doesn't earn interest or dividends and costs money to hold, making it poor competition compared with bonds and stocks when rates are climbing.
A stronger US dollar, which rallied in response to the US jobs data, also put a damper on gold price. The ICE Dollar Index was recently up 0.7 per cent at 89.33. As the dollar strengthens, dollar-denominated gold futures become more expensive for buyers using other currencies, dimming their ability to buy the precious metal.
"We've had dollar strength since July and gold has been moving in opposition to that," Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, said.
"Gold changes its colours from being an inflation hedge to being a disaster hedge to a hedge against the dollar, and over the last three months it's been playing the latter role," he said.
Other precious metals followed gold lower, with platinum posting its steepest one-day drop since October 3. Platinum for January delivery fell $US26.40, or 2.1 per cent, to $US1,219.50/oz on the Nymex.