Gold falls further from 9-week high after upbeat US data

[LONDON] Gold fell further from an earlier nine-week high on Friday as stronger-than-expected US payrolls data boosted the dollar and stock markets, shoring up a recovery in equities from this week's rout.

The Labor Department said US job growth surged in December, and revised employment for the prior two months sharply higher, suggesting that a recent manufacturing-led slowdown in economic growth would be temporary.

That lifted stocks, which had been flagging after an earlier recovery ran out of steam, while pushing the dollar up 1 per cent versus the euro.

Spot gold touched a low of US$1,093.53 in the wake of the data and was down 0.8 per cent at US$1,100.65 an ounce at 1356 GMT. US gold futures for February delivery were down US$7.40 an ounce at US$1,100.40.

"(These are) very strong numbers, good for the US dollar," Georgette Boele, analyst at ABN Amro, said. "The US dollar is the most important negative driver for gold prices, so this will add pressure."

A strong report could be seen as prompting the Federal Reserve to lift interest rates at a faster pace. Rising rates typically weigh on gold, as they lift the opportunity cost of holding non-yielding assets, while boosting the dollar.

The prospect of rising rates in the United States was a key factor pushing gold down more than 10 per cent last year.

Jitters over the Chinese economy had spooked global stock markets earlier this week, sending investors sprinting to safe-haven assets, and pushing gold sharply higher. Gold peaked at US$1,112 earlier on Friday, its highest since early November.

Investment appetite for bullion showed signs of picking up this week. Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose 4.2 tonnes on Thursday, data from the fund showed.

"Concerns over China, and possibly the Middle East, have prompted some safe-haven demand. That has stirred the gold price," Capital Economics analyst Simona Gambarini said. "But as we know, safe-haven demand can be quite volatile."

"We are generally positive on the gold price for the year, but not necessarily on safe-haven demand. That's a wild card."

Silver was down 2.1 per cent at $14.00 an ounce, while platinum was up 0.2 per cent at $874.65 an ounce. Palladium was up 1.6 per cent at $500.25 an ounce.

Palladium fell below $500 for the first time since September 2010 on Thursday, reaching a low of $481.67. It is set to end the week down 11 per cent.

REUTERS