Gold accelerated declines on Friday after a stronger-than-expected U.S. jobs report doused expectations for U.S. interest rate cuts this year, adding to bearish sentiment driven by data showing top consumer China held off on bullion purchases in May.
Spot gold dipped about 3% to $2,304.54 per ounce as of 1757 GMT. U.S. gold futures settled 2.8% lower to $2,325.
Gold fell nearly 1% so far this week, marking its third straight weekly fall.
Caught in gold’s slipstream, silver shed 6.6% to $29.25 per ounce, platinum fell over 3.6% at $967.05 and palladium lost 2.2% to $909.06.
“We will find out today whether gold has the stomach to absorb the one-two punch of a strong employment report and a pause in Chinese buying,” said Tai Wong, a New York-based independent metals trader. The Labor Department’s report showed Nonfarm Payrolls (NFP) rose by 272,000 jobs in May, against expectations of an increase of 185,000. The data also drove a rally in the dollar, making bullion more expensive for overseas buyers. [USD/] [US/] Traders lowered their bets to price in 37 basis points (bps) of cuts by end-December, from 48 bps before the NFP data, with the first cut more likely seen coming in November instead of September.
The gold market is seeing a bit of liquidation, along with other metals since the data shows the U.S. economy is quite robust and the Fed may delay that first cut, said Phillip Streible, chief market strategist at Blue Line Futures.
Higher rates increase the opportunity cost of holding non-yielding bullion.
The jobs report also added to the bearish sentiment seemingly driven by data showing top consumer China held off gold purchases in May after 18 consecutive months of buying.
But analysts at TD Securities wrote in a note that while the China news notably hit the yellow metal, “the pause in purchasing could just be a hint of a return to a more price sensitive operation given the run up in prices.”