Gold prices fell on Friday after a stronger-than-expected US jobs report strengthened the case for the Federal Reserve keeping interest rates high for longer. The stronger dollar and rising Treasury yields weighed on the metal.
Spot gold was down 0.3% at $4,074.36 an ounce by 1:54 p.m. ET (1854 GMT). Earlier in the session, it slid by more than 1% to touch a low of $4,033.29. Even so, the metal was still up 5.2% for the week, putting it on course for its best weekly performance since August.
US gold futures for December delivery settled 0.9% lower at $4,074.90.
Jobs and inflation
US nonfarm payrolls rose by more than analysts had expected in October, while the unemployment rate dropped to 4.1%. The figures pointed to a labour market that has held up well, giving the Fed more room to focus on inflation linked to the Middle East conflict.
Markets have moved quickly. Traders now put the chance of a rate hike in December at 81%, up from 72.8% before the payrolls release, according to CME’s FedWatch tool.
Higher interest rates make it more costly to hold gold, which pays no interest or yield, so the metal tends to lose appeal when rates are expected to rise. Two Federal Reserve officials on Thursday also backed small, steady rate increases to bring above-target inflation under control.
The dollar rose 0.7%, reaching its highest level since October 29. That made gold more expensive for buyers holding other currencies. Yields on the benchmark 10-year Treasury also climbed.
A test for the rally
Gold opened sharply lower after the jobs data but then began to recover. Independent metals trader Tai Wong said the reaction was a test of whether this week’s rally could hold.
Oil markets were also moving. Brent crude was heading for a steep weekly fall as investors bet on a easing of the US-Iran conflict following the midterm election results. Persistent concerns about Middle East supply, however, kept prices from falling further.
Support from Indian buyers
The lower gold price has drawn Indian retail buyers ahead of the Diwali festival, a key period for gold purchases in the country. Gold had hit a one-year low of $3,869.85 an ounce on October 30, and the recent recovery has been welcomed by buyers who had been waiting for prices to ease.
Other precious metals
Spot silver rose 0.8% to $52.18 an ounce. Platinum gained 1.6% to $1,541.42, while palladium fell 0.6% to $1,024.59. Despite the day’s moves, all three metals were on track for weekly gains.