Gold Slides As Jobs Data Rekindles Taper Worries

New York (Nov 8)  A stronger-than-forecast report on U.S. employment put gold futures under pressure early Friday as the data rekindled worries about whether the Federal Open Market Committee might start tapering its quantitative easing program yet this year after all.

Now, observers said, market participants will be watching to see whether the price pullback is used as a buying opportunity by those in the physical market. Much of that demand typically comes from India, China and other Asian nations, and markets there are now closed until next week.

U.S. nonfarm payrolls rose by 204,000 during October, the Labor Department said. This is well ahead of consensus expectations for jobs growth of 100,000 to 120,000. Further, previously reported data for September and August were revised upward by a combined 60,000 jobs. The unemployment did tick up slightly as expected, however, to 7.3% from 7.2%.

“The jobs data came in noticeably better, and from some people’s expectations, spectacularly better than expectations,” said Sterling Smith, futures specialist with Citi Institutional Client Group. “That should equate to new nervousness about quantitative easing and the Federal Reserve tapering.”

More specifically, traders now figure there is a greater chance that the Fed could start tapering its bond-buying program, known as quantitative easing, next month, analysts said.

“We have to see whether the fall (in gold prices) will be attractive to physical buyers,” said Robin Bhar, metals analyst with Societe Generale. “They may step back in and help support the market.”

By 09:40am EST spot gold was down $22 to $1,288, while spot silver slipped 26 cents to $21.44.