[NEW YORK] Gold fell nearly 3 per cent to a three-month low on Friday after stronger-than-expected US non-farm payrolls fueled expectations the Federal Reserve will raise rates sooner rather than later, and the dollar jumped to an 11-1/2 year high.
US employers stepped up hiring in February and the unemployment rate fell to nearly a seven-year low, putting further pressure on the Fed to raise interest rates in June.
Spot gold was down 2.6 per cent at US$1,167.40 by 2.38 pm EST (1938 GMT), on track for its biggest daily drop since October 2013. The metal was heading for a fifth straight session of losses and the biggest weekly drop in a month.
US gold for April delivery settled down US$31.90, or 2.7 per cent, at US$1,164.30 an ounce.
An increase in US interest rates would further boost the value of the dollar, in turn hurting demand for non-interest-bearing assets such as gold. "The market may be reading too much into one data release,"said Frances Hudson, global thematic strategist at Standard Life Investments in Edinburgh. "When the central bank tells you the move is going to be data dependent, I'm pretty sure they're not going to say that particular data release will be the tipping point because payroll figures are quite often subject to pretty substantial revisions." A stronger US currency makes dollar-denominated gold more expensive for holders of other currencies, while a rise in yields on US bonds is negative for the metal, whose holders earn no interest. "We continue to forecast a further strengthening of the US dollar, which will keep gold under pressure," Deutsche Bank said in a note.
On the physical market, prices on the Shanghai Gold Exchange suggested physical demand for gold in China, the second biggest bullion consumer, remained at healthy levels.
Chinese gold prices were about US$4 to $5 an ounce higher than the global benchmark.
Spot silver was down 2 per cent at $15.84 an ounce, after falling to a two-month low of US$15.74. Palladium was off 1.1 per cent at US$815 an ounce, and platinum dropped 1.7 per cent to US$1,154.75 an ounce.