Gold prices tumbled after the release of US job data demonstrated the economy is rebounding after a lacklustre first quarter.
Gold for August delivery on the Comex division of the New York Mercantile Exchange declined $7.10 to close at $1,168.10 per ounce. Trade ranged from $1,162.10 to $1,178.00.
Gold declined in four of the five sessions this week as US data gradually confirmed the Federal Reserve recent minutes, which said declining first quarter growth was due to temporary factors – like the unseasonably harsh winter.
Total non-farm payroll employment increased by 280,000 in May, easily beating the forecast 226,000, while the unemployment rate was essentially unchanged at 5.5 percent. Private sector job growth has increased 63 straight months, a US record.
“A stronger headline figure in this month’s employment report out of the US helped the dollar retrace most of this week’s losses; pressure in the lacklustre gold was only enough to see it net $5 lower since the release despite slipping to a fresh two month low at $1,162,” Triland Metals said. “Whilst the risk remains skewed to the downside up until September, volume and momentum is lacking and sentiment remains tepid.”
The members of the Fed’s policy board are locked in what has become an increasingly public debate on when will be the right time to raise rates, which have been near zero since December 2008.
At its last meeting, the Fed removed all calendar references in its forward guidance and said that recent economic weakness might be “transitory” in nature. This means that bank is now entirely dependent on data so a rate increase could happen at any future meeting.
Since the US central bank’s dual mandate is to promote maximum employment and maintain longer-run inflation at two percent per year, this forecast-beating employment read could inch the FOMC closer to increasing the federal funds rate.
Meanwhile in Greece, the country delayed a 300-million-euro repayment to the IMF until the end of June, increasing the risk of a Greek exit from the bloc. The euro responded by falling sharply and is currently down 0.9 percent to 1.1135 against the dollar.
“With investor sentiment for gold so weak, gold prices may well continue lower but we do feel this is leading to a better buying opportunity. And given developments in Greece and with the potential for corrections in other asset classes, it may not be too long before the markets start looking for a safe haven again,” FastMarkets’ William Adams said.
In the eurozone, French trade balance in April was a negative three billion, above forecasts of four billion, while German factory orders month-over-month in April was up 1.4 percent, beating consensus of 0.6 percent.
In equities, the Dow Jones industrial average was down 0.2 percent, while the S&P was unchanged.
As for the other precious metals, Comex silver for July delivery was last down 7.30 cents at $16.030 per ounce. Trade has ranged from $15.925 to $16.160.
Platinum futures for July delivery on the Nymex were down $5.10 at $1,094.1 per ounce, while the most-actively traded palladium contract was at $752.45, down $2.85.
(Editing by Tom Jennemann)
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