Gold fell more than 2 percent early on Friday, set for its biggest one-day drop in over three weeks, as funds dumped bullion after resilient US jobs data suggested the Federal Reserve could begin to scale back its monetary stimulus later this year. The metal is headed for its first weekly drop in two weeks after Friday's selloff more than erased gains earlier this week.
A sharp dollar drop and strong physical demand had lifted gold above $1,400 an ounce for most of this week. The United States added 175,000 jobs last month after adding just 149,000 in April, the Labour Department said on Friday, reducing hopes of prolonged stimulus, and that weighed down on gold's inflation-hedge appeal.
"It's a knee-jerk reaction to the jobs data. Demand for gold is currently in the summer doldrums and the data provided an excuse to sell," said David McAlvany, CEO of McAlvany Financial, a unit of McAlvany Wealth, which has $475 million in assets under management. Spot gold was down 2.3 percent at $1,380.46 an ounce by 12:25 pm EDT (1625 GMT), having earlier hit a low of $1,377.29, the lowest since May 28.
US Comex gold futures for August delivery were down $35.80 an ounce at $1,380.00. Despite the sharp pullback in prices, trading volume was on track to finish below its 30-day average, preliminary Reuters data showed. Officials in the world's biggest bullion consumer, India, continued efforts to curb gold imports on Friday, with the Reserve Bank of India extending restrictions on loans against security of gold coins per customer to all co-operative banks.
This came after India announced another increase in its import duty for gold earlier this week. Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 2.7 tonnes to 1,007.74 tonnes on Thursday, as outflows resumed after holding steady for nearly a week. Holdings are at four-year lows. Silver was down 3.8 percent at $21.73 an ounce. Platinum slipped 1.9 percent to 1,496.99 an ounce, while palladium edged down 0.2 percent to $756.97 an ounce.