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Home Commodities Gold falls 3% on positive jobs and China data

Gold falls 3% on positive jobs and China data

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Gold prices accelerated their decline on Friday after a better-than-expected U.S. jobs report dented expectations of an interest rate cut this year, and bearish sentiment was strengthened by data showing that China, the biggest consumer, cut back on gold purchases in May.

Spot gold was down about 3% to $2,304.54 an ounce as of 5:57 p.m. U.S. gold futures were down 2.8% to close at $2,325.

Gold has fallen about 1% so far this week, its third consecutive weekly decline.

Caught up in gold’s decline, silver fell 6.6% to $29.25 an ounce, platinum fell more than 3.6% to $967.05 and palladium dropped 2.2% to $909.06.

“Today we’ll see if gold can withstand the double whammy of a strong jobs report and a pause in buying from China,” said Tai Wong, a New York-based independent metals trader. The Labor Department reported that nonfarm payrolls rose 272,000 in May, beating expectations of an increase of 185,000. The data helped spur a stronger dollar, boosting gold prices for overseas buyers. [USD/] [US/] Traders lowered their forecasts to now price in a 37 basis point (bps) rate cut by the end of December, down from 48 bps before the NFP data, with the first cut now more likely to come in November rather than September.

Philip Streible, chief market strategist at Blue Line Futures, said the gold market is seeing some liquidation along with other metals as data shows the U.S. economy is in fairly strong shape and the Fed may postpone its first rate cut.

As interest rates rise, the opportunity cost of holding non-yielding bullion increases.

The employment data was also likely weighed down by data showing that major consumer China cut back on gold purchases in May after 18 consecutive months of bullion purchases.

But while the news about China hit gold particularly hard, “given the rising gold price, the pause in purchasing may simply signal a return to a more price-sensitive trade,” TD Securities analysts wrote in a note.

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