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Gold Prices Trade Sideways on Jobs Report

NEW YORK (TheStreet) -- Gold prices were trading sideways Friday as market participants assessed a November jobs report that offered an upside surprise to economists' forecasts.

Gold for February delivery at the COMEX division of the New York Mercantile Exchange was unchanged at $1,231.90 an ounce. The gold price traded as high as $1,245 and as low as $1,210.10 an ounce, while the spot price was adding $5.03.

Gold prices dived immediately after the November employment report showed that the United States added 203,000 jobs and the unemployment rate dipped to 7% -- its lowest level since November 2008. The initial selloff suggested that traders were betting the strong jobs data would force the Federal Reserve to scale back its economic stimulus program.

A sharp move higher soon followed, before gold finally traded at levels seen before the jobs report.

"Its a really bad environment for gold when you have unemployment going down and the economy is blasting up," Mike McGlone, director of research at ETF Securities U.S., said in a phone interview from New York. "It's really responding appropriately to this much stronger than expected data."

The Fed repeatedly has stated that a steady stream of good economic data -- with a heavy focus on positive labor data -- would give the central bank reason to slow its monetary stimulus, a measure that many investors view as inflationary policy. Some investors view gold as a hedge against inflation.

Taking the first trading week in December into context, the gold market tumbled on Monday, and recovered Wednesday on short-covering, only to reverse Thursday as traders immediately shorted the market again.

The market is sitting right where it settled a week ago despite a raft of positive economic data that printed this week, which suggests that investors already had anticipated the likelihood of stronger economic and labor growth.

McGlone said he thinks the gold market is expecting the Fed to signal in its Dec. 18 policy-making statement its intention to taper asset purchases. McGlone said he didn't think the market is expecting the Fed to actually scale back its stimulus in December.

Should the Fed taper, it could sink gold prices below critical price support at about $1,200 an ounce.

Silver prices for March delivery were down 2 cents to $19.56 an ounce, while the U.S. dollar index was adding 0.06% to $80.31.

Gold mining stocks were solidly in the green. Shares of Newmont Mining (NEM) -- the only gold mining stock in the S&P 500 -- were jumping 1.5% to $23.54.

Among volume leaders, Barrick Gold (ABX) was rising 1.1% to $15.60 a share.

Gold ETF SPDR Gold Trust (GLD) was up 0.35% to $118.71, while iShares Gold Trust (IAU) was increasing 0.25% to $11.94.

-- Written by Joe Deaux in New York.

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