Gold Falls on Better-Than-Expected Jobs Data

New York (Mar 7)  Gold prices tumbled on Friday after a closely watched U.S. employment report exceeded expectations.

Gold for April delivery, the most actively traded contract, was recently down $15.30, or 1.1%, at $1,336.50 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold prices have steadily marched higher in recent months, as doubts about the health of the U.S. labor market fanned speculation that the Federal Reserve would keep in place its stimulus program for longer than expected. Some investors, who worry that the Fed's easy money efforts can raise inflation or weaken the dollar, have purchased gold as a hedge.

But on Friday, gold prices dropped to a low of $1,331.80 an ounce after data showed the U.S. economy added 175,000 jobs in February. This was more than the 152,000 increase economists forecast.

The unemployment rate, which is collected though a separate survey, ticked up to 6.7% from 6.6% in January.

February's data marked a turning point in what was becoming a worrisome trend for some investors, as the labor market showed signs of a rebound despite continued severe winter weather. By contrast, January and December's readings had missed expectations by a wide margin, prompting some market participants to worry that the U.S. labor market was running out of steam.

"The fact that the report beat expectations despite the bad weather is adding to gold's losses," said Sterling Smith, a futures specialist with Citi Institutional Clients Group. Mr. Smith said he had expected the report to miss the forecast due to continued bad weather.

"This is one serious strike against any ideas that we would see a change in Fed's policy to a more dovish stance," he said.

Source: Online WSJ