Gold futures fell to an 11-week low after the U.S. economy added more jobs in May than forecast, boosting the case for the Federal Reserve to raise U.S. interest rates.
Payrolls climbed by the most in five months and worker pay accelerated, Labor Department data showed Friday. The dollar jumped to a 13-year high against the yen and gained against most major currencies, cutting the appeal of precious metals as alternative assets.
Investors have been shunning gold on signs that the economy has gained enough traction to damp the need for haven assets, spurring concern that better growth will push policy makers to raise rates. On Wednesday, holdings in exchange-traded products backed by the metal fell to the lowest since 2009, according to data compiled by Bloomberg. Futures dropped for the third straight week.
“Today’s data gives the Fed the cover to raise rates, and positive rates cannot be good for gold,” Edward Dempsey, the chief investment officer at Pension Partners LLC in New York, said in a telephone interview. “Good economic data reinforces the ‘risk-on’ scenario, which again is gold unfriendly.”
Gold futures for August delivery fell 0.6 percent to settle at $1,168.10 an ounce at 1:53 p.m. on the Comex in New York. The price touched $1,162.10, the lowest for a most-active contract since March 19.
Higher rates erode the appeal of gold, which doesn’t pay interest, as investors seek higher-yielding assets, including new bonds. The Fed’s benchmark has been close to zero percent since 2008, and policy makers are monitoring progress in the labor market to determine when to begin tightening.
The gains for U.S. payrolls can help to bring volatility back to the gold market, which has been characterized by a lack of direction since March. The metal has moved 1.3 percent on the day when monthly employment data is released, about twice the average daily swing, according to data compiled by Bloomberg from the past 12 months.
This week, futures dropped 1.8 percent, the most since April 24. The price has declined 11 percent from this year’s high of $1,307.80 on Jan. 22.
Silver futures for July delivery fell 0.7 percent to $15.984 an ounce. The price touched $15.925, the lowest since May 1. Aggregate volume was 41 percent above the 100-day average, according to according to Bloomberg data.
On the New York Mercantile Exchange, platinum futures for July delivery dropped 0.7 percent to $1,092 an ounce. This week, the metal fell 1.8 percent, the third straight decline and the longest slump since Feb. 20.
Palladium futures for September delivery slipped 0.6 percent to $750.95 ounce. The price dropped for the sixth straight session, the longest slump since Feb. 4, 2014.