Gold futures fell by 2.7% at the close of trading after a better than expected monthly growth in non-farm payrolls fueled speculation that the US Federal Reserve would raise the lending rate sooner than expected.
According to a report by the Labor Department on Friday Non-farm payrolls grew by 295 000 in February this year compared to a downwardly revised 239 000 increase in January. This better-than-expected growth undercut gold prices by strengthening the dollar to an eleven year high.
“A very strong U.S. dollar mixed with low inflation expectations and policy makers intent on stimulating economic growth create circumstances where gold as a store of value seems near obsolete,” Jonathan Citrin, founder and executive chairman of CitrinGroup told MarketWatch.
US gold for April Delivery had fallen by $31.90 or 2.7% to close at $1,164.30 on Friday trading. Spot gold tumbled 2.6% to $1,167.40 in what is its biggest loss since November 2013. This comes after a week of straight losses for the precious metal.
If the Federal Reserve raises the interest rates as is widely expected, it will further bolster the Dollar hurting non-interest bearing commodities like gold.
“The market may be reading too much into one data release,” Frances Hudson, global thematic strategist at Standard Life Investments in Edinburgh told Reuters.
“When the central bank tells you the move is going to be data dependent, I’m pretty sure they’re not going to say that particular data release will be the tipping point because payroll figures are quite often subject to pretty substantial revisions.”
On the market, however, gold prices at the Shanghai Gold Exchange were between $4 and $5 higher than the global benchmark suggesting that there still was healthy demand in China.
Spot silver prices slumped 2% to close at $25.84. Spot palladium slipped 1.1% to close at $815 an ounce while platinum fell 1.7% to close at $1,154.75 an ounce.
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