Gold dropped 1.7 percent on Friday, on track for its biggest one-day fall in more than a month, as surprisingly strong US jobs data raised the prospect that the Federal Reserve may soon decide to temper its bond-buying stimulus. A flurry of sell orders in heavy volume sent US gold futures over $10 lower just minutes after the October nonfarm payroll data, setting a weaker tone for the rest of the day. A similar move in gold futures was also seen after Thursday's strong GDP report.
Rallying US equities and a soaring US dollar sent gold to a three-week low, as bullion underperformed silver and platinum group metals. The S&P 500 index was up 0.8 percent on better economic hopes, while the dollar index rose 0.6 percent. "Those payroll numbers made the folks who buy gold nervous as they did not go in the direction they wanted to see, suggesting that tapering could be back on the table," said Axel Merk, chief investment officer at California-based Merk Funds, which have $450 million assets under management.
Spot gold was down 1.7 percent at $1,285.20 an ounce by 11:17 am EDT (1617 GMT). The metal is on track to fall 2.2 percent for the week, its second consecutive weekly loss. US Comex gold futures for December fell $23 to $1,285.50 an ounce, with trading volume on track to finish in line with its 250-day average, preliminary Reuters data showed.
Gold has lost about a fifth of its value this year due to fears the Fed would begin cutting back its $85 billion monthly bond purchases. The metal's inflation-hedge appeal has been burnished by the bond purchases and low interest rates. "At the moment, the market is looking at underlying growth and can see how the US is accelerating and that very simply leads to tapering one way or another, which is obviously not bullish for gold," BofA Merrill Lynch analyst Michael Widmer said.
The metal had managed a rebound in recent weeks after a prolonged budget battle in Washington in October led investors to believe the Fed may not start withdrawing support for the economy and possibly push the tapering into next year. Among other precious metals, silver was down 1.5 percent at $21.31 an ounce. Platinum fell 0.8 percent to $1,436.74 an ounce, while palladium dropped 0.4 percent to $755.47 an ounce.
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