Gold price slips after mixed US jobs report

Washington (Feb 5)  The price of gold slipped after a mixed US jobs report on Friday, but was still on track for its biggest weekly gain in a month on doubts about whether the Federal Reserve can keep raising interest rates.

US nonfarm payrolls increased by 151,000 in January, well below a Reuters poll forecast for a rise of 190,000 and down from 292,000 in December, but hourly wages surged and the US unemployment rate fell to an eight-year low, suggesting the labour market recovery remains on track.

Spot gold initially rose after the jobs report to $1,161.31 an ounce, its highest since October 29, but by 2.01pm GMT it was down 0.5% at $1,149.86 an ounce.

The price has advanced nearly 4% so far this week as investors turned doubtful that the US will raise rates this year after a top Fed official, William Dudley, said there was a need to consider the weakening global outlook in framing US monetary policy.

But analysts said some traders may have trimmed positions in gold slightly after the jobs report as the strength of US wage growth and the drop in the unemployment rate may have revived the prospect of some hikes this year.

As a non-interest bearing asset, dollar-denominated gold becomes less attractive if US interest rates rise.

"Gold is still a lot above where it was at the beginning of the week and it still looks less likely that the US will go ahead with a rate hike in the next few months so that is positive for gold," said Simona Gambarini, an analyst at Capital Economics.

A shaky global economy has lifted buying interest in gold, making it among the best performing assets since the start of 2016 with a gain of more than 9%. Other precious metals rose on the back of gold’s rally, with silver and platinum also at multi-month highs. Silver is on track for its best week since May last year.

US gold for April delivery was down 0.6% at $1,150.20 an ounce.

"We see no compelling reason for more than a normal retracement before bullion resumes an upward move," HSBC analyst James Steel said in a note, adding gold was underpinned by risk-off sentiment and a shift in global monetary policy.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose to 22.3m ounces on Thursday, the highest since late October.

Spot silver was down 0.8% at $14.75 an ounce, but not far from Thursday’s three-month high of $14.91 and has gained more than 3% this week.

Platinum was down 1.2% at $896.96 an ounce, while palladium was down 0.6% at $508.73, after earlier hitting a one-month high at $518.14.