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Gold Hit by Bouncing Buck

Simon Constable

A bullish jobs report and weak European economic news boosted the dollar and sent gold skidding Wednesday.

February gold contracts plunged $12 to close at $ 635.90 an ounce on the Comex division of the Nymex, and the bullion exchange-traded funds, iShares Comex Gold Trust (IAU Quote) and streetTracks Gold Shares(GLD Quote) followed suit, off about 1.8% recently.

The driving factor in the dollar price move was news that the U.S. economy added 158,000 private sector jobs in November, according to a new estimate from payroll-provider ADP. That compares with gains of 128,000 jobs added in the previous month, and consensus estimates for Friday's official non-farms payroll report at around 100,000.

"Yes, there are jobs out there," says John Silvia, chief economist at Wachovia in Charlotte. "The data shows that the economy is stronger than previously portrayed."

Meanwhile, weaker-than-expected reports on Germany 's manufacturing orders, and industrial output and consumer confidence in the U.K. further bucked up the greenback vs. the euro and sterling.

The euro was recently trading at $1.3286 vs. $1.3326 late Tuesday, and the dollar was buying 115.25 yen, up from 114.82 yen previously. The price of gold and that of the dollar tend to move in opposite directions.

Silvia predicts that the dollar should remain relatively robust, at least until new data arrive on Friday. That's when economists are forecasting the Labor Department to report a November unemployment rate of 4.5% Friday, vs. an October figure of 4.4%. He adds that the jobs data may be skewed by seasonal hiring of retail employees.

Among the miners, the CBOE Gold Index was slipping 1.2%, with shares of component Gold Fields(GFI Quote) leading the pack down, off 2.2% recently. The index was being partially buoyed by shares of Meridian Gold(MDG Quote), up 0.6%, and those of Freeport McMoRan Copper & Gold(FCX Quote), up 0.8% recently.

Elsewhere, shares of Yamana Gold(AUY Quote) were losing 2.3% in active trading.

Away from the yellow metal, silver prices were skidding as well, with contracts for March delivery closed down 23 cents at $13.795 an ounce on the Comex. The silver ETF, iShares Silver Trust(SLV Quote) was off also, down 2% recently.

In the platinum space, HSBC Securities upped its price target on shares of North American Palladium(PAL Quote) to $5 a share from $4, but retained an underweight rating on the stock. Shares were trading at $8.40 a share recently, off 1.7%.

In base metals, copper prices were retreating on the Comex, with March-dated contracts closing down 8.7 cents at $3.16 a pound. The weakness in the red metal barely weighed on shares of Southern Copper(PCU Quote), which were gaining 0.4% lately.