Gold retreats Friday in European trade

LONDON (Sept 5)  Gold fell on Friday, reversing course as better-than-expected US employment data bolstered the dollar, putting bullion on course for a weekly decline of more than 2%.

Spot gold erased early gains to fall 0.4 % to $1,922.71 per ounce by 10:57 a.m. (1457 GMT). US gold futures fell 0.5% to $1,927.30 per ounce.

"Gold's correlation with the dollar has been elevated, especially over the past couple of weeks and bullion is being weighed down by the bounce in the greenback following the solid report, especially the unemployment rate," said Tai Wong, head of base and precious metals derivatives trading at BMO.

The dollar index was up 0.5%, putting it on track for its best week since early April and making the metal expensive for holders of other currencies. Data showed nonfarm payrolls increased by 1.371 million jobs in August. The unemployment rate fell to 8.4% from 10.2% in July.

"However, this data does not change the US Federal Reserve's stand on more stimulus to be pumped into the economy and its take on tolerating a higher inflation rate, keeping gold supported in the long run," said Michael Matousek, head trader at US Global Investors.

The metal has gained over 26% so far, helped by near-zero interest rates globally and easy monetary policy, especially from the Fed, and safe-haven demand driven by a clouded economic picture due to the coronavirus pandemic.

Elsewhere, silver fell 0.4% to $26.51 an ounce and has shed 3.6% over the week, while palladium dipped by 0.4% to $2,275.85. Platinum rose about 1% to $897.87 an ounce but was on track for its biggest weekly decline since mid-June, down more than 3.5%.

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