Gold slides 1% as strong US jobs data clouds rate cut bets

Gold prices fell on Friday as the dollar and Treasury yields strengthened after traders lowered bets for US interest rate cuts to materialize by March next year following a stronger-than-expected jobs data.

Spot gold fell 1% to $2,008.79 per ounce by 9:55 a.m. ET (1455 GMT), and was down nearly 1% for the week so far. U.S. gold futures also lost 1% at $2,025.10.

The dollar index firmed 0.2%, making bullion more expensive for overseas buyers. Also, 10-year Treasury yields ticked higher.

U.S. job growth accelerated in November while the unemployment rate fell to 3.7%, suggesting financial market expectations of a rate cut early next year were probably premature.

“Gold has slumped as the U.S. employment report showed strength across the board,” said Tai Wong, a New York-based independent metals trader.

“If today, gold finishes at new lows under $2,009, that would be a signal that the correction has further to run. If gold holds well on a pretty strong payrolls number it will give buyers confidence that we’ve seen at least a short-term bottom.”
Traders had earlier priced in about a 60% chance of a March start to Fed rate cuts, but after the jobs data, pared that to just under 50%, with May now a more likely starting point. Traders will seek further confirmation from the Fed meeting scheduled on Dec. 12-13.

“We expect short dips in gold market but see continued strength in demand, keeping the overall trend sideways to higher,” said David Meger, director of metals trading at High Ridge Futures.

Physical gold dealers in India increased discounts to seven-month highs this week to lure customers as record local prices hurt demand. [GOL/AS]

Spot silver lost 1.9% at $23.34 per ounce, while platinum gained 0.9% to $915.46. Both were set for weekly declines.

Palladium fell 0.1% to $959.99 and on track for a second weekly loss.