
Gold Plummets as Payrolls Jump (Update 1)
Updated from 10:35 a.m. ET with settlement prices
NEW YORK (
) --
tumbled on Friday after a strong June jobs report blemished the yellow metal's appeal as a safe-haven asset.
Gold for August delivery at the COMEX division of the New York Mercantile Exchange plummeted $39.20 to $1,212.70 an ounce. The
traded as high as $1,257.10 and as low as $1,206.90 an ounce, while the spot price was off $37.60.
"Good news for the economy is bad news for gold as interest rates jumped on the payroll news and bond yields jumped higher; all this makes strong stocks, strong dollar and weak metals," George Gero, precious metals strategist at RBC Capital Markets, wrote in a note.
The Bureau of Labor Statistics reported nonfarm payrolls rose by 195,000 in June, as the unemployment rate remained unchanged at 7.6%. Economists polled by
Thomson Reuters
anticipated non-farm payrolls to have added 165,000 jobs.
for September delivery slid 96 cents to settle at $18.74 an ounce, while the
was boosting 0.74%.
Gold has been trapped in bear territory since mid-April, when the price of an ounce plummeted about $200, or 13%, over two consecutive trading days. It was the largest two-day drop in 30 years for the precious metal.
Pillaging the value of the asset has been
Federal Reserve
language that the central bank may begin to taper its $85 billion a month in purchases of mortgage-backed securities and longer-term Treasuries, and improving economic data in housing, labor and consumer confidence, among others.
A spike in bond yields following the strong jobs report on Friday suggested the market anticipates the Fed will begin to scale back its monetary policy sooner than expected.
"This again suggests that Fed tapering is going to happen; I think that the estimate
to taper was for October,
but it looks like it may even happen in September now," said Gene Goldman, director of research at Cetera Financial.
Possibly providing some support to falling prices is Thursday's unprecedented move by the European Central Bank President Mario Draghi to provide forward guidance. The ECB said it doesn't plan to raise interest rates and that it expects key rates to remain the same or at lower levels for an extended period of time.
Investors should understand that this means the European Central Bank will continue its policy of monetary stimulus, despite the Fed's possible transition to scale back its efforts.
Gold mining stocks were mostly lower on Friday. Shares of
AngloGold Ashanti
(AU) - Get Report
were dropping 8.8% and shares of
Kinross Gold
(KGC) - Get Report
were dipping 8.5%.
Among volume leaders,
Barrick Gold
(ABX)
was off 7.8%.
Gold ETF
SPDR Gold Trust
(GLD) - Get Report
was down 2.8%, while
iShares Gold Trust
(IAU) - Get Report
also was sliding 2.9%.
-- Written by Joe Deaux in New York.
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