Gold slid to its lowest level in three weeks as the dollar jumped in the wake of US strong jobs data that raised the chances of the Federal Reserve slowing assets purchases before the end of the year.
Bullion fell as much as 1.9 per cent to $1,282 a troy ounce after the US added 204,000 jobs in October – more than twice the number expected by analysts.
There were also large revisions to payrolls data for August and September. Over the week, gold fell 3 per cent.
“The average monthly employment increase over the past three months (202,000) is above the threshold that makes the Fed feel comfortable enough to start tapering its asset purchases,” said economists at UniCredit.
The US dollar index, which tracks the performance of the greenback against a basket of six currencies, rose 0.6 per cent – close to a two-month high.
A stronger dollar and a scaling back of the Fed’s quantitative easing programme is seen as negative for gold, which has benefited from ultra-loose monetary policy and low interest rates.
Gold has fallen 22 per cent this year and is on course for its first annual decline in 13 years.
Reduced demand for “safe” investments and expectations of US monetary policy shifts triggered a rush out of gold exchange traded funds (ETFs) earlier in the year.
However, strong physical demand for jewellery, coins and bars from China has helped support the gold price after it fell sharply in April and again in June.
Analysts have said China will import more than 1,000 tonnes of gold this year and will overtake India as the world’s biggest consumer of gold.
But the metal has come under renewed pressure this month with analysts pinning the weakness on lacklustre demand from investors and physical buyers in China and India.
Inflows into ETFs proved to be fleeting with net redemptions reaching 48 tonnes in October, according to Barclays, while there has been a slow start to a peak gold buying period in India, where the government has imposed several restrictions on the import of gold in order to curb a record trade deficit.
This has pushed local premiums to record highs.
In addition, demand from China is not expected to pick up until six-to-eight weeks before the start of the Chinese New Year.
“In China, the volume traded on the Shanghai Gold Exchange has softened further, while media reports from India continue to paint a picture of limited buying before a key festival in which gold buying occurs,” analysts at Barclays wrote in a report published earlier this week.
Elsewhere, silver dipped 1.3 per cent to $21.35 an ounce, having also fallen to a three-week low, while platinum eased 0.9 per cent to $1,436 an ounce.