Gold prices dipped below support after US employment numbers exceeded estimates, which could encourage the Federal Reserve to act on rates sooner rather than later.
Gold for August delivery on the Comex division of the New York Mercantile Exchange was last down $7.00 to $1,168.20 per ounce. The yellow-metal was trading at $1,173.80 before the release of the payroll data.
Total nonfarm payroll employment was 280,000 in May, above the consensus of 226,000, while the unemployment rate was unchanged at 5.5 percent.
US 10 year treasury bonds rose 0.106 basis points to 2.415 percent, a sharp increase after the data release and an indication that market participants are bearish on the prospects of gold in the near-term.
“Robust US labour market data this afternoon could drive yields up even further and thus put additional pressure on gold,” Commerzbank said. “This is because higher bond yields make holding gold less attractive because gold does not yield any interest itself.”
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 International Monetary Fund 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 1.1 percent to $1.1111 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, Germany’s Dax and France’s CAC-40 were each down 1.5 percent.
As for the other precious metals, Comex silver for July delivery was last down 9.30 cents at $16.010 per ounce. Trade has ranged from $15.925 to $16.160.
Platinum futures for July delivery on the Nymex were down $5.40 at $1,094.0 per ounce, while the most-actively traded palladium contract was at $751.45, down $3.85.
(Editing by Tom Jennemann)
The post Gold tumbles below $1,170/oz on strong US employment data appeared first on The Bullion Desk.
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