Gold fell but off its earlier lows early on Wednesday as the dollar surged after a strong US private-sector employment report, which reinforced an improving economic outlook and dented safe-haven buying. US data showed a surprise jump in US private-sector jobs last month. This boosted the dollar, making dollar-denominated commodities more expensive.
"A lot of gold's weakness has to do with the fact that investors believe economic performance is going to pick-up as we start 2011," said James Dailey, portfolio manager of the Team Asset Strategy Fund. Gold had gained nearly 30 percent in 2010 to a record $1,430.95 on December 7, but the market sold off at the start of the year after a thin-volume holiday rally. Spot gold fell 0.3 percent to $1,376.20 an ounce at 12:27 pm EST (1727 GMT).
Earlier, it fell more than 1 percent to session lows at $1,363.80, a day after it lost 2.5 percent to its biggest one-day loss since early November in a profit-taking commodities rout. US February gold futures fell $1.40 to $1,377.40. "I don't think this marks a turnaround from what has been and continues to be bullish sentiment towards gold and hard assets in general," said Credit Agricole analyst Robin Bhar.
Silver fell for a third consecutive session, under pressure from the strength in the dollar and a decline in other growth-linked assets such as base metals. Adding to the pressure on silver was the third daily rise in the gold/silver price ratio, which measures the number of ounces of silver needed to buy one ounce of gold. The ratio fell by a third to multi-year lows in 2010 as silver outperformed gold with an 84 percent price rise. Spot silver dropped 1.6 percent to $29.31 an ounce. Spot platinum fell 1.3 percent to $1,729.74, while palladium lost 0.6 percent to $770.47.