LONDON, (Reuters) – Gold slid below $1,180 a troy ounce on Friday as the dollar rose on a stronger than expected U.S. employment report that raised sentiment on growth and dented gold as a currency hedge.
Spot gold fell 2.6 percent to $1,174.70 a troy ounce and was bid at $1,178.50 an ounce at 1601 GMT compared with $1,207.10 late in New York on Thursday.
U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange fell more than $40 to $1,177 an ounce.
U.S. employers cut a far fewer-than-expected 11,000 jobs in November, the smallest decline since the start of the recession in December 2007, strongly suggesting the deterioration in the labor market was in its final stages. That boosted the dollar against the euro and yen.
“Gold has been hit quite badly after the dollar strengthened on the non-farm payrolls data … counter to what you would normally expect,” said Dan Smith, analyst at Standard Chartered.
Spot prices struck a record high at $1,226.10 an ounce on Thursday amid expectations for persistent weakness in the dollar and rising inflation in 2010. “The euro has fallen back below $1.50 … it has undercut the need for the currency hedgers to purchase gold,” said James Steel, metals analyst at HSBC in New York.
The dollar rose 1.1 percent against a basket of currencies, while the euro was last bid at $1.4892, with some economists suggesting U.S. interest rates may be able to rise sooner than expected. “The data point to a transition in the economy from a deep recession to a modest recovery,” said William Sullivan, chief economist, JVB Financial Group in Florida. “This will encourage the Fed to be more vocal about an exit strategy from their highly accommodative posture.”
On the investment front, demand for gold remained firm, with the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, saying its holdings rose 0.276 tonnes to 1,131.490 tonnes on Thursday. Elsewhere, metals consultancy GFMS said China will overtake India as the world’s largest gold consumer in 2009, with total demand forecast at 432 tonnes. Indian demand has been pressured this year by rising prices.
Among other precious metals, silver was bid at $18.49 an ounce against $18.80 late on Thursday in New York. The world’s largest silver ETF, the iShares Silver Trust, said its holdings rose 113.05 tonnes to a record 9,514.35 tonnes on Thursday.
Platinum fell almost 3 percent to $1,445.50 an ounce against $1,480.50, while palladium was at $373.50 against $380.50.
ETF Securities, which operates exchange-traded products that issue securities backed by physical metal, said holdings of its platinum and palladium ETPs rose to record levels on Thursday, up 0.3 percent and 0.7 percent respectively.