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Gold slides 2% as solid US jobs data trims Fed rate cut bets

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[BENGALURU] Gold slid as much as 2 per cent on Friday and was set for its first weekly fall in seven weeks after data showed US jobs growth rebounded strongly in June, which lowered the likelihood of an interest rate cut by the Federal Reserve this month.

Spot gold dropped 1.2 per cent to US$1,398.71 per ounce by 143 pm EDT (1749 GMT) having hit a low of US$1,386.52 earlier. The metal is set for a weekly decline of about 1 per cent, which could be its biggest since mid-April.

US gold futures settled 1.5 per cent down at US$1,400.10.

Nonfarm payrolls increased by 224,000 jobs last month, the most in five months, data showed. Economists polled by Reuters had forecast payrolls rising by 160,000 jobs.

"The US jobs data is driving all the pressure on gold right now. The payroll numbers crushed all expectations. That may decrease the urgency for a Fed cut in July," said Chris Gaffney, president of world markets at TIAA Bank.

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Adding pressure on gold, the dollar surged to an over two-week peak against a basket of six major currencies.

Gold is highly sensitive to interest rates and a lower chance of a cut would increase the opportunity cost of holding the non-interest-bearing bullion.

Federal funds futures implied traders now see only a 9.0 per cent chance the US central bank will decrease key money market rates by half a point, down from 29 per cent on Wednesday, according to CME Group's FedWatch program.

"Most of the markets though, still see some kind of cut but it pulls away that expectation of a 50-basis-points cut and most of what can be expected is a quarter-basis-point cut," Gaffney said.

The outlook for gold still remains positive, however, analysts said. Gold hit a six-year high of US$1,438.63 an ounce last week and is still holding above key technical levels.

"The yellow metal will likely find buyers as the global growth slowdown should keep demand strong for gold," Edward Moya, senior market analyst at OANDA, said in a note.

Gold is often seen as an alternative investment during times of political and financial uncertainty.

Meanwhile, in India, the world's second largest gold consumer, local rates surged to record highs following a surprise hike in the gold import duty on Friday.

The announcement is likely to increase the price paid by consumers, Capital Economics said in a note.

"While we had already been anticipating a slowdown in India's gold imports this year, soaring prices and higher tariffs present an additional headwind to demand."

Silver slid 1.9 per cent to US$14.99 per ounce, while platinum dipped 3.4 per cent to US$804.

Palladium gained 0.58 per cent to US$1,571.01 an ounce and was heading for a fifth straight weekly gain.

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