Gold falls as improved US employment data sparks sell-off
Gold fell from a record high as better-than-expected US employment data signalled that the economic rebound is still making progress.
Selling was also fuelled by traders who fixed the London gold price lower while the dollar curbed the metal’s safe-haven appeal.
Payrolls increased by 1.76 million in July, beating estimates for a 1.48 million gain, according to data released on Friday, while the unemployment rate fell more than expected.
Prices also weakened as the LBMA gold price was set about $14 lower in the afternoon auction, according to Tai Wong, head of metals derivatives trading at BMO Capital Markets. The dollar headed for its first gain in four sessions amid a deepening rift between Washington and Beijing.
“Precious metals are taking a breather as the US dollar and interest rates marginally recover in the aftermath of the stronger-than-expected jobs report,” TD Securities strategists including Bart Melek said on Friday.
Traders set the LMBA gold price at $2,031.15 (Dh7,460.41) an ounce in the afternoon action. There were no buyers for about 90,000 ounces, BMO’s Mr Wong said.
The London fix is used to settle contracts between LBMA members and serves as a benchmark for miners, banks and jewellers around the world to trade and value the metal.
Bullion fell as much as 2.3 per cent, the most since June, but it is still up more than 33 per cent this year, putting it on track for the biggest annual gain in more than four decades.
It is also poised for the longest stretch of weekly gains since 2006 as the health crisis, negative real rates and geopolitical risks spark a flight to precious metals. Further gains were predicted, and Bank of America said gold could reach $3,000 an ounce in 18 months while silver could hit $35 next year.
Spot gold declined by 1.5 per cent to $2,033.28 an ounce as of 2.59pm in New York after earlier hitting a record high of $2,075.47. Prices are still up for a ninth week, while holdings in exchange-traded funds backed by the metal are at a high.
Spot silver dropped as much as 5.3 per cent before trading 3 per cent lower at $28.0635. The price had earlier advanced to $29.85, the highest since 2013.
US President Donald Trump signed a pair of executive orders prohibiting US residents from doing business with the Chinese-owned TikTok and WeChat apps. The order begins 45 days from now. The Treasury Department said on Friday that the US is placing sanctions on 11 Chinese officials and their allies in Hong Kong.
Elsewhere, negotiations on a coronavirus relief package ended with the White House and Democrats making no headway in resolving their biggest difference, bringing the talks to the brink of collapse.
With no deal immediately in the offing, Mr Trump said last Thursday that he was ready to sign orders that will extend enhanced unemployment benefits for the jobless and impose a payroll tax holiday for employers and workers.
Signs that Europe’s biggest economy is finding its feet again could also be putting pressure on bullion. Germany’s industrial output grew slightly more than forecast in June, after figures released last Thursday showed that factory demand was at 90.7 per cent of the level recorded at the end of last year.
However, European Central Bank chief economist Philip Lane issued a warning against premature optimism and said the region’s third-quarter performance will be crucial to determining the strength and sustainability of the recovery.