Gold Fizzles in Worst Week Since ‘13 as Fed Rate Fears Resurface

  • Bullion poised for worst weekly loss in more than three years
  • The U.S. added 156,000 jobs last month, trailing estimates

Gold Fizzles in Worst Week Since 2013

Gold had the the biggest weekly loss in more than three years as investors judged that a weaker-than-expected U.S. payrolls report won’t be enough to sidetrack the Federal Reserve from raising interest rates this year.

Cleveland Fed President Loretta Mester said Friday that there’s a “strong, compelling case” to raise interest rates. Mester spoke after a Labor Department report Friday showing slower but still-steady job gains in the U.S. in September. Higher interest rates curb the appeal of gold, which doesn’t pay interest.

After the best first half in almost four decades, the gold rally has faltered as improved U.S. economic data fueled bets that policy makers would soon lift rates, with at least one Fed official urging more rapid increases. The odds of a rate hike by December climbed to 66 percent, from 59 percent a week ago, Fed funds futures data showed.

“This is a response to the data being fairly OK, and people being quite convinced that the Fed is on its way to tightening in December,” Bart Melek, head of commodity strategy at TD Securities in Toronto, said in a telephone interview.

Gold futures for December delivery slipped 0.1 percent to settle at $1,251.90 an ounce at 1:40 p.m. on the Comex in New York, taking this week’s loss to 5 percent, the worst for a most-active contract since September 2013.

The share of working-age people in the labor force climbed to a six-month high in September and wage growth picked up, while the unemployment rate rose to 5 percent, Labor Department data showed Friday. Payroll gains slowed for a third month and just missed analysts’ estimates, though August hiring was stronger than initially estimated, according to the data.

A “strategic buying opportunity” may open up if gold should prices drop substantially below $1,250, Goldman Sachs Group Inc. said in a report dated Thursday. While the decline over the past month has been in line with the bank’s bearish outlook, there could be a case for purchases if the selloff deepens, according to analysts including Jeffrey Currie and Max Layton.

In other precious metals:

  • Silver futures for December delivery slumped 9.6 percent on the Comex this week, the worst loss since April 2013.
  • On the New York Mercantile Exchange, palladium had its biggest weekly decline since January. Platinum posted its worst week since November.
  • In industrial metals, copper futures for December delivery gained 0.4 percent to $2.1635 a pound on the Comex. That pared the first weekly loss in a month to 2.1 percent.  
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