PRECIOUS-Gold slips after upbeat U.S. nonfarm payrolls

Thu Jul 3, 2014 3:22pm EDT

* US nonfarm payrolls rise 288,000 in June
    * Unemployment rate falls to 6.1 pct
    * Palladium hits fresh 13-year high

 (Adds analyst comment, double byline, updates market activity)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, July 3 (Reuters) - Gold slipped on Thursday
after U.S. nonfarm payrolls rose more than expected in June,
fueling expectations U.S. interest rates could rise earlier than
expected. 
    U.S. employment growth jumped in June and the jobless rate
closed in on a six-year low, compelling evidence the economy was
growing briskly heading into the second half of the year.
    Nonfarm payrolls increased by 288,000 jobs and the
unemployment rate declined to 6.1 percent, the Labor Department
said on Thursday. 
    "It is interesting that we are well into the territory now
that one would expect a normalization of monetary policy," said
Mitsubishi Corp analyst Jonathan Butler. "There is still
downside risk there on gold," he added.
    Fed policymakers have in the past promised to keep rates
near zero until U.S. unemployment falls below 5.5 percent, as
long as inflation and financial stability risks are contained. 
    Spot gold was down 0.6 percent to $1,319.15 an ounce
by 2:04 PM EDT (1404 GMT), having earlier dropped as much as 1.3
percent to a one-week low of $1,309.64.
    U.S. COMEX gold futures for August delivery settled 
down $10.30 at $1,320.60 an ounce, with trading volume about 30
percent above its 30-day average, preliminary Reuters data
showed.
    Some analysts argue that gold can rise in tandem with higher
interest rates.
    "If interest rates start rising, it's because the Fed is
worried about inflation, and that inflation factor can drive
gold prices up even as interest rates rise," said Jeffrey
Christian, managing director at CPM Group.
    A low interest-rate environment has been key to higher gold
prices since the 2008 credit crisis, however, as investors were
more willing to put their money in noninterest-bearing assets.
    Traders said gold could also receive a boost in the longer
run after European Central Bank President Mario Draghi said a
raft of policy measures introduced last month will help lift
inflation and support bank lending. 
    Among other metals, palladium was up 0.4 percent at
$855.60 an ounce.
    Palladium, mostly employed in gasoline autocatalysts,
predominantly used in the United States and China, rose to its
highest level since February 2001 at $864.45 an ounce, as good
U.S. data lifted prospects for stronger auto demand.
    Platinum was down 0.5 percent at $1,494.25 an ounce,
hovering near a 10-month high of $1,517.50 reached on Wednesday,
while silver ended unchanged at $21.09 an ounce.
    
 2:04 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1320.60 -10.30  -0.8  1309.40 1329.00  139,120
 US Silver SEP  21.137 -0.165  -0.8   20.820  21.230   38,995
 US Plat OCT   1507.70  -3.80  -0.3  1494.50 1511.30   10,448
 US Pall SEP    861.90   4.50   0.5   849.10  867.45    5,540
                                                              
 Gold          1319.15  -7.99  -0.6  1309.64 1327.39         
 Silver         21.090  0.000   0.0   20.850  21.160
 Platinum      1494.25  -7.25  -0.5  1492.90 1506.25
 Palladium      855.60   3.40   0.4   849.50  864.45
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        155,048   120,472   164,401     13.08   -0.77
 US Silver       40,949    70,978    54,619     19.41   -0.57
 US Platinum     10,630    17,767    12,178     17.04    0.51
 US Palladium     6,210     5,083     5,833      19.3   -0.80
                                                              
 
 (Additional reporting by A. Ananthalakshmi in Singapore;
Editing by William Hardy and Tom Brown)
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