Gold slides over 2% as strong US data bolsters Fed taper bets

[BENGALURU] Gold slid as much as 2.3 per cent on Thursday as better-than-expected US employment and service sector data propelled the dollar higher and boosted expectations that the strong economic readings may reignite taper talk from the Federal Reserve.

Bullion's retreat also spilled into other precious metals, with silver slipping as much as 4.3 per cent and platinum shedding 3.7 per cent.

Spot gold was down 1.9 per cent at US$1,871.91 per ounce by 1:43 p.m. EDT (1743 GMT), after falling to its lowest level since May 20 at US$1,864.39. US gold futures settled down 1.9 per cent at US$1,873.30.

"We're coming out of the woods here, the data is getting better, there are some inflation issues that could put a damper on things, but we have turned the corner," Bob Haberkorn, senior market strategist at RJO Futures, said.

"The better-than-expected data has put traders on the defense. They're preparing for possible statements from the Federal Reserve on tapering or higher rates, although not immediately."

The dollar index jumped 0.7 per cent, making gold expensive for other currency holders, while the US yields also ticked up.

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Signaling a strong labor market recovery, new US jobless claims dropped below 400,000 last week, while private employers stepped up hiring in May, the ADP National Employment Report showed.

Meanwhile, a measure of US services industry activity increased to a record high in May.

"A much stronger-than-expected ADP result suggesting a similar bounce back in payrolls tomorrow after last month's terrible print has driven the dollar notably higher and triggered long liquidation in gold under US$1,890," said Tai Wong, head of metals derivatives trading at BMO.

"The US$1,850-60 support is significant and should hold in gold." The focus now turns to key US nonfarm payroll numbers due on Friday.

Silver fell 2.9 per cent to US$27.39 per ounce and platinum slipped 2.7 per cent to US$1,156.96 after sinking to its lowest level since late March, while palladium shed 1.2 per cent to US$2,821.55.

REUTERS