Gold slides over 2% after strong jobs data dims rate cut prospects
Gold prices held steady on Friday, and were on track for their first weekly gain in three as traders stepped up bets that the U.S. Federal Reserve will start cutting rates soon, sending the dollar and Treasury yields lower.
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Gold accelerated declines after a stronger-than-expected US jobs report doused expectations for US interest rate cuts this year, adding to bearish sentiment driven by data showing top consumer China held off on bullion purchases in May.
Spot gold last fell 2.13% to $2,325 per ounce. U.S. gold futures dropped 1.94% to $2,344.40.
The Labor Department’s report showed Nonfarm Payrolls (NFP) rose by 272,000 jobs in May, against expectations of an increase of 185,000.
Average hourly earnings rose 0.4% on a monthly basis, compared to an expectation of 0.3% growth.
The unemployment rate rose to 4% versus a forecast of 3.9%.
“We will find out today whether gold has the stomach to absorb the one-two punch of a strong employment report AND a pause in Chinese buying,” said Tai Wong, a New York-based independent metals trader.
“Gold is trading at recent lows with the significant technical support at $2,275 potentially in play,” Wong added.
The jobs report also added to the bearish sentiment seemingly driven by data showing top consumer China held off gold purchases in May after 18 consecutive months of buying.
Traders lowered their bets to price in 38 basis points (bps) of cuts by end-December, from 48 bps before the NFP data, with the first cut more likely seen coming in November instead of September.
Higher rates increase the opportunity cost of holding non-yielding bullion.
This article was originally published by a www.cnbc.com
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