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Gold dips 2% after US jobs data; set for weekly fall

[LONDON] Gold fell up to 2 per cent on Friday as global shares and the dollar rose after monthly US non-farm payrolls data showed the United States job market remained on a strong footing.

Nonfarm payrolls increased 257,000 last month, topping expectations for 234,000 jobs, and data for November and December was revised higher. The unemployment rate ticked up to 5.7 per cent as a result of an increased labour force.

"The US employment report was good and there has been quite a sharp adjustment in interest rates expectations, with 10-year Treasury yields up 10 basis points," ABN Amro analyst Georgette Boele said.

"I expect lower precious metals prices for the next six months up to the moment the US really starts hiking interest rates."

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Spot gold dropped to a three-week low of US$1,237.39 an ounce in earlier trade and was down 1.9 per cent to US$1,240.15 an ounce by 1508 GMT. The metal has lost 3.2 per cent so far this week, which would be its largest fall since the week ending Oct 31.

It gained 8.4 per cent in January, its biggest monthly rise in three years, lifted by global economic concerns and political uncertainty in the eurozone.

US gold for April delivery dipped 1.6 per cent to US$1,241.30 an ounce.

The dollar rose 0.9 per cent against a basket of leading currencies, helped by a rise in the benchmark 10-year US Treasury yield to 1.9 per cent. European shares pared earlier losses and Wall Street opened higher after the US data.

The gold market was also keeping an eye on China's move this week to cut the reserve requirement for banks in an effort to fight off an economic slowdown and Greece, where increased uncertainty has supported prices.

"The negative pulls for gold are the elevated speculative positions, hawkish Fed and stronger dollar, while the lowering of the reserve requirements in China, negative yields in most European countries and uncertainty in Greece lend support," Saxo Bank senior manager Ole Hansen said.

Elsewhere, holdings at SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose on Thursday to 24.86 million ounces, the highest since September.

China's gold consumption fell 24.7 per cent to 886 tonnes last year even as output from the world's top consumer climbed 5.5 per cent, the China Gold Association said.

Spot silver slid 2.3 per cent to US$16.84 an ounce. Platinum was down 2.3 per cent at US$1,222.90 an ounce and palladium dropped 1.6 per cent to US$781.20 an ounce.