Gold at 11-week low after US data, set for 3rd weekly fall

[NEW YORK] Gold hit an 11-week low on Friday, heading for a third straight weekly slide, as the dollar rallied after better-than-expected US employment data bolstered prospects for an interest rate increase this year.

Non-farm payrolls increased 280,000 last month, the largest gain since December, above the 225,000 that economists polled by Reuters had expected.

Spot gold fell as much as 1.2 per cent to its lowest since March 19 at US$1,162.35 an ounce and was down 0.5 per cent at $1,170.66 an ounce by 2:55 pm EDT (1855 GMT), heading for a 1.6 per cent weekly fall, the third straight decline and the biggest since April 24.

US gold futures for August delivery settled down US$7.10 at US$1,168.10 per ounce. "The US data triggered a break below important support levels of US$1,175 and US$1,170," ActivTrades chief analyst Carlo Alberto de Casa said. "The break lower caused the metal to exit that US$1,170-$1,220 trading range in which it had been confined for many weeks, making it more vulnerable to further declines towards US$1,150 and $1,131." Bill O'Neill, co-founder of commodities investment firm LOGIC Advisors in New Jersey, said US$1,140 holds strong support. "The market was vulnerable and looking defensive all week. We gradually were breaking support levels," Mr O'Neill said.

The dollar rose 1.5 per cent versus a basket of currencies after the data, seen as a key barometer of the US economy. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies, while higher interest rates would hit demand for the non-interest-paying metal.

Sluggish growth in the first quarter had left markets doubting whether the US Federal Reserve would raise rates this year but strong data throughout the week could put the Fed back on track to increase rates as soon as September.

New York Fed President William Dudley said he still expects the Fed will be in position to raise rates later this year, but only if growth rebounds from a weak first half, and there is more progress on lowering the unemployment rate and other measures of labor market weakness.

Investors were also keeping an eye on Greece after it delayed a debt payment to the International Monetary Fund due on Friday.

Trading in physical markets was bleak and premiums in major trading centers across Asia have barely moved in the past few weeks.

Spot platinum fell 0.5 per cent to US$1,090 an ounce. Silver fell 0.1 per cent to US$16.04 an ounce, while palladium edged 0.3 per cent lower to US$750 an ounce.

REUTERS