Gold 'without friends' as investors eye monthly US payrolls

[SINGAPORE] Gold slid for a third day as investors prepared for the release of a key report on US employment Friday that will give further clues on the timing of an interest-rate increase by the Federal Reserve.

Bullion for immediate delivery dropped as much as 0.3 per cent to US$1,207.11 an ounce before trading at US$1,209.89 at 9:39 am in Singapore, according to Bloomberg generic pricing. The metal is down 0.2 per cent this week.

Gold has pared its rally this year to 14 per cent on speculation that the Fed will tighten monetary policy in June or July, damping the appeal of bullion which doesn't pay interest.

Economists surveyed by Bloomberg forecast a report on Friday will show employers added 160,000 jobs in May, the same as April, with the unemployment rate slipping to 4.9 per cent.

In the week to May 24, money managers cut net-long positionsby 26 per cent, the most this year, prompting analysts at Australia & New Zealand Banking Group Ltd to say in a note Friday that the metal "remains without friends."

"The major driver of the May sell-off in gold was increased expectations of a Fed hike, though it was also technically overbought," Jordan Eliseo, Sydney-based chief economist at trader Australian Bullion Co, said by e-mail.

"A strong payrolls report will confirm the likelihood of an imminent move by the Fed, and could see gold tested again. This correction provides an opportunity for those who missed out on some of the 1Q gains."

On Thursday, data from the ADP Research Institute showed 173,000 workers were taken on in May, while filings for unemployment benefits declined for a third consecutive week, according to separate US data.

Open interest, a tally of outstanding contracts in futures on the Comex in New York, fell 1.5 per cent Wednesday to the lowest since April 8.

BLOOMBERG