Gold falls after US payrolls beat expectations, boosts rate hike view

LONDON — Gold fell by 1% on Friday in the wake of strongerthan-expected US non-farm payrolls data which shored up expectations that the Federal Reserve will press ahead with interest rate hikes this year.

That drove the dollar higher against a currency basket, putting it on track for its biggest one-day rise since late October, pressuring gold, which is priced in the US unit.

Spot gold was down by 1% at $1,334.95 an ounce at 1420 GMT, while US gold futures for June delivery were $ 10.30 an ounce lower at $1,337.60 an ounce.

Labor department data showed US job growth surged in January and wages rose further, posting their largest annual increase in more than 8-1/2 years. That supported expectations that inflation will rise this year.

“This should cause rate hike expectations, lift the US dollar and weigh on gold,” Commerzbank analyst Carsten Fritsch said. “In particular the wage rise is eyecatching as this could ultimately push core inflation towards the Fed’s 2% target.”

“The Fed already raised its inflation view in the statement this week,” he said.

The US bond market’s gauges of inflation expectations added to their earlier rise on Friday and US Treasury yields rose further, with the 10-year hitting a four-year high as the data intensified the current bond market rout.

The dollar’s bounce put it on course for its first weekly increase in seven weeks, after the currency slid to a three-year low two weeks ago.

Its weakness was a key factor driving gold to 17-month highs on Jan. 25 at $1,366.07 an ounce.

“For gold it is more about the US dollar,” ABN Amro analyst Georgette Boele said. “Even if rate hike expectations go up but the US dollar doesn’t, gold will perform well.”

On the physical side of the market, demand improved this week in major consumer India, with jewellers resuming purchases after the government kept import taxes on the metal unchanged. Demand remained subdued in most other centers in Asia.

Holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Shares, were on track to decline for the first week in three this week, indicating more subdued investment appetite for the metal.

Silver was 1.7% lower at $16.94 an ounce, while platinum was down 1% at $ 995.30 and palladium was up 0.60% at $1,042.97.