Gold futures fall, on pace for weekly drop ahead of much-anticipated jobs report

London (Sept 2)  Gold futures fell Friday and were on track for a weekly drop, as investors wait to see if an expected upbeat August payrolls report offsets the downbeat reading on factories that gave gold a small lift a day earlier.

The debate over the speed and aggressiveness of Federal Reserve interest-rate changes remains pinned to each economic release but the payrolls report can carry additional weight for financial markets. A strong payrolls reading could put a September interest-rate hike back on the table, presumably lifting the dollar and dulling the appeal of greenback-priced gold. Prospects for higher rates also tend to turn off investors from nonyielding precious metals.

Ahead of the report’s release, December gold GCZ6, -0.02% fell $2.10, or 0.2%, to $1,315.00 an ounce. Gold rebounded mildly Thursday but it settled Wednesday at $1,311.40 an ounce, the lowest settlement for a most-active contract since June 23, according to FactSet data. As such, gold is on track to log a 0.8% weekly loss at current trading levels.

The ICE U.S. Dollar Index DXY, +0.08%  , a measure of the greenback against a basket of six rival currencies, was up 0.1%.

Fed Chairwoman Janet Yellen reiterated at the Jackson Hole, Wyo., economic summit last week that any decision on rates would be depended on the “degree to which incoming data continues to confirm the Fed policy committee’s outlook.”

The Institute for Supply Management said Thursday its manufacturing index in August fell to 49.4% from 52.6% last month, below the consensus expectation for a 52% reading. A reading below 50% indicates contraction.

But trading this week has largely been simply marking time ahead of Friday’s release. The Labor Department is expected to say the world’s largest economy added 170,000 jobs in August, according to a MarketWatch poll of economists.

Read: What the jobs report will tell us about the Fed and the economy

“Following two months of stellar jobs growth in June and July, another concrete report could go a long way in building investors’ expectations for a Fed rate hike as early as September,” said Charalambos Pissouros, senior analyst with IronFX Global, in a note. “Currently, the market is pricing in a 24 percent probability for such a move.”

“Considering the latest optimistic signals by many [Federal Open Market Committee] officials including [Chairwoman Janet] Yellen, we believe that a solid report is likely to cause this probability to soar and thereby add fuel to the dollar’s recent rally,” he said.

In other trading, December silver SIZ6, -0.10%   fell 5 cents, or 0.3%, to $18.90 an ounce. Silver is on track to log a roughly 1% gain for the week after suffering a decline of more than 8% in August, based on the most-active contract.

Among exchange-traded funds, the SPDR Gold Trust GLD, +0.41%  was down 0.1% premarket and the iShares Silver Trust SLV, +1.24%   fell 0.7%. The VanEck Vectors Gold Miners GDX, +3.65%  slipped 0.6%.

Source: MarketWatch