Gold fell two percent on Thursday after better-than-forecast US jobs data boosted the dollar, reviving expectations the Federal Reserve could raise interest rates soon. Data on Thursday showed claims for state unemployment benefits declined 34,000 to a seasonally adjusted 262,000 for the week ended April 25, the lowest reading since April 2000.
Separately, US consumer spending rose 0.4 percent last month after rising 0.2 percent in February, while the Chicago Purchasing Management Index jumped more than expected in April. Spot gold was heading for its biggest daily fall since March 6, dropping as much as 2 percent to a session low of $1,179.77 an ounce earlier. It was down 1.9 percent at $1,181.32 an ounce by 1404 GMT.
The metal had hit a three-week high ahead of the Fed's statement that followed a two-day policy meeting on Wednesday, as a string of soft economic data dimmed prospects for a US interest rate increase in June. US gold futures for June delivery dipped $29.30 an ounce to $1,181.00. "It looks like the trigger (for today's weakness) was the US data, with strong jobs creation," Saxo Bank senior manager Ole Hansen said.
"Since the Fed yesterday said it is not too worried (about the economic slowdown) because it's seasonal, a set of data that points towards confirming that statement, makes the market a bit jittery." The dollar rose 0.2 percent against a basket of currencies after the US jobs data, rebounding from a nine-week low hit following soft economic growth numbers for the first quarter on Wednesday.
Although the Fed downgraded its view of the US labour market and economy on Wednesday, it said the poor performance was in part due to transitory factors, not effectively ruling out raising rates at its next meeting. "Ultimately the determinant for sustained price direction will come from the rate hiking cycle once it is underway ... the inevitability of that remains the constraint on gold prices," Standard Chartered analyst Nicholas Snowdon said.
Higher rates would dent demand for bullion, a non-interest-paying asset. Physical bullion demand in Asia has quietened in recent days as gold held above $1,200 an ounce. A significant pick-up in demand would support global prices. Silver followed gold lower, losing 4 percent to $15.93 an ounce. Platinum fell 2 percent to $1,130.45 an ounce, while palladium was down 1.4 percent at $769.22 an ounce.
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