The price of gold slipped back from three-month highs on Friday as a mixed US jobs report prompted investors to reassess the outlook for US interest rates this year and pushed the dollar higher. US non-farm payrolls rose by 151,000 in January, well below a Reuters poll forecast for a rise of 190,000 and down sharply from December, but hourly wages surged and the unemployment rate fell to an eight-year low, suggesting the labour market recovery remains on track.
Spot gold initially rose after the jobs report to $1,161.31 an ounce, its highest since October 29, but it then fell to a session low of $1,144.96. By 1524 GMT it was down 0.5 percent at $1,149.5 an ounce. The price has advanced nearly 3 percent this week as investors started to doubt that the US will raise rates this year after a top Fed official, William Dudley, said there was a need to consider the weakening global outlook in framing US monetary policy.
But analysts said some traders may have trimmed positions in gold slightly after the jobs report as the strength of US wage growth and the drop in the unemployment rate may have revived the prospect of rate hikes. "The data shows a March (interest rate) increase is not totally out of the question, it's probably 50-50," said Robin Bhar, an analyst at Societe Generale. "That's why gold sold off after the report, as the dollar rose."
As a non-interest bearing asset, dollar-denominated gold becomes less attractive if US interest rates rise. Peter Hug, global trading director at Kitco Metals, said in a note that the recent surge in metals prices was due for a correction and traders took profits after the jobs data. "Technically the market remains bullish but the $1,137 level (for gold) must hold," he said.
US gold for April delivery was down 0.4 percent at $1,152.5 an ounce. A shaky global economy has lifted buying interest in gold, making it among the best performing assets since the start of 2016 with a gain of more than 8 percent. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 22.3 million ounces on Thursday, the highest since late October. Other precious metals rose on the back of gold's rally, with silver and platinum also at multi-month highs, but they too pulled back on Friday.
Spot silver was down 0.7 percent at $14.78 an ounce, but not far from Thursday's three-month high of $14.91 and has gained more than 3 percent this week. Platinum was down 1.1 percent at $897.99 an ounce, while palladium was down 1.3 percent at $505.22, after earlier hitting a one-month high at $518.14.
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