Gold slipped on Friday as an encouraging US jobs report boosted the dollar, though eurozone debt worries and unrest in the Middle East lifted bullion off lows. Positive nonfarm payrolls and manufacturing data confirmed a strengthening US economy, but economists said the news was not enough to push the Federal Reserve away from an ultra-easy monetary stance that has helped gold hit record highs.
"As economic conditions appear to be improving, evidenced by today's data, gold suffers as a store of value in times of fiscal or financial uncertainties," said Mark Luschini, chief investment strategist at broker-dealer Janney Montgomery Scott with $53 billion in assets under management. Spot gold dropped 0.6 percent to $1,428.20 an ounce as of 2:01 pm EDT (1801 GMT), sharply off its low at $1,412.55 hit earlier in the session.
Bullion has risen about 0.5 percent this week for its second consecutive weekly gain. It hit a record $1,447.40 an ounce last week. US gold futures for June delivery settled down 0.8 percent at $1,428.90, with COMEX trading volume slightly below its 30-day average after strong turnover earlier this week partly due to contract rollover. Gold recorded a 10th consecutive quarter of gains in the first three months of 2011, but it was the smallest rise since the financial crisis gripped markets in late 2008.
"Just because we had a good payrolls number today, that doesn't mean that one data point makes things all well and good," Luschini said. Luschini said political unrest in the Middle East and eurozone sovereign debt issues underpinned gold, and end-of-quarter fund allocation also boosted the metal earlier this week before the trade unwounded on Friday.
A successful debt sale by Portugal on Friday did little to cull expectations it will soon join the eurozone bailout list, while Ireland's credit rating was cut after bank stress tests revealed another black hole. Despite a rally in energy prices, stagnant growth in wages does not bode well for gold's inflation-hedge appeal, said Peter Buchanan, senior economist at CIBC World Markets.
Jeffrey Lacker, Richmond Fed president, said the US central bank could raise interest rates by the end of the year to curb rising inflation. Nick Moore, head of commodity strategy at RBS, said gold prices were likely to suffer further from expectations that the European Central Bank will raise interest rates this month.
Investment products such as gold-backed exchange-traded funds saw less interest, with the No 1 SPDR Gold Trust reporting its biggest ever quarterly outflow in the first quarter. US Mint data showed gold American Eagles sales were the strongest in the first quarter since the end of 2009, and quarterly sales of silver American Eagle coins rose to a record in the same period.
Silver gained 0.2 percent to $37.69 an ounce. Platinum group metals rose but gains were limited after General Motors Co said US sales in March came in below expectations. Platinum rose 0.2 percent to $1,768.99 an ounce, while palladium climbed 1.6 percent to $770.22.
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