Gold recovers from five-week low after US jobs data

[NEW YORK] Gold recovered on Friday from an early drop to five-week lows after a US non-farm payrolls report for February failed to meet elevated expectations, prompting a drop in the dollar and Treasury yields.

The Labor Department data, which showed US non-farm payrolls rose 235,000 last month, beat official forecasts but was not enough to satisfy those whose expectations had been boosted by a strong private payrolls number earlier in the week.

The US dollar fell against a basket of currencies amid disappointment that wages were only growing gradually.

The figures shored up prospects for the Federal Reserve to hike interest rates this month, however. Anticipation of a March hike has put gold on track for its biggest weekly loss in four months this week.

Spot gold was up 0.1 per cent at US$1,202.36 an ounce by 2:56pm EST (1956 GMT), after falling to US$1,194.55, its weakest since Jan 31. US gold futures for April delivery settled down 0.2 per cent at US$1,201.40.

"Whisper estimates for job growth were probably a bit higher after the strong ADP (private payrolls) number," Commerzbank analyst Carsten Fritsch told the Reuters Global Gold Forum.

"Jobs growth was stronger than expected, but wage growth remains subdued, so the last link to higher inflation is still missing."

Gold is sensitive to rising US interest rates as these increase the opportunity cost of holding non-yielding bullion, while boosting the US dollar, in which it is priced. The metal remains vulnerable to signs real interest rates are increasing, analysts said.

"All eyes are now on Wednesday's rate hike and what will happen when it actually comes to fruition," said Miguel Perez-Santalla, vice-president of Heraeus Metal Management in New York, adding that precious metals prices were holding ground.

"Many expect this as a bullish signal but many traders are going to the sideline, preferring to be flat over the weekend."

Pointing to softening investor appetite, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 2.7 tonnes on Thursday, bringing the outflow for the week so far to 6.5 tonnes.

Silver was up 0.04 per cent at US$16.95 an ounce, after hitting its lowest since Jan 27 at US$16.78. It was on track to close the week down 5.6 per cent, its weakest in four months.

Palladium was down 0.1 per cent at US$745.90, after falling to US$739.43, the lowest since Feb 3.

Platinum was up 0.6 per cent at US$937.80. However, platinum has fallen nearly 6 per cent this week, having touched its lowest since Jan 4 at US$928.50.

REUTERS