* Better-than-expected US jobs data reignite stimulus worry
* Dollar rally, ECB hints at lower rates hit gold further
(Updates with close of New York futures session for gold; adds
quotes, new byline and NEW YORK to dateline)
By Barani Krishnan and Clara Denina
NEW YORK/LONDON, July 5 Gold tumbled 3 percent
on Friday after positive U.S. jobs data sent the dollar rallying
and rekindled worries the Federal Reserve could be tempted to
scale back its monetary stimulus later this year.
The U.S. non-farm payrolls report for June showed employers
added 195,000 new jobs last month, exceeding expectations of
165,000. The unemployment rate held steady at 7.6 percent.
The better-than-expected job numbers are among data that
could steer the Fed toward a shorter timetable for its $85
billion in monthly bond purchases, analysts said.
Concerns about when the U.S. central bank could begin paring
its stimulus has triggered turbulence across major asset classes
worldwide. That has prompted Fed officials to back-pedal on
Chairman Ben Bernanke's recent suggestion that the retreat could
occur between later this year and next.
"The jobs numbers we got today simply reinforce the market's
forward-looking position on where gold is likely to be down the
road," said Frank McGhee, head precious metals trader at
Integrated Brokerage Services in Chicago.
"The market is looking 6 to 8 months out, pricing gold in a
rising interest rates environment."
The spot price of bullion dropped by as much as 3.3
percent to a session low of $1,207.50 an ounce. By 2:00 p.m. EDT
(1800 GMT) it was hovering at around $1,215, still down nearly 3
percent and set for a third consecutive week of losses.
U.S. gold futures for August settled down 3.1
percent at 1,212.70 an ounce.
Gold posted its biggest quarterly loss on record, down 23
percent for April-June and hit a near 3-year low of $1,180.71
last week, on selling exacerbated by Bernanke' comments that the
economy was recovering strongly enough for the Fed to begin
tapering in the next few months.
Such a retreat would support a rise in interest rates,
making gold less attractive as a buy-and-hold asset.
DOLLAR AT 3-YEAR HIGH
The dollar rose to a three-year high against a basket
of major currencies in Friday's session.
"We fully expect that, if the U.S. economy continues to
improve, you will see a further strengthening of the dollar,
which is negative for the dollar-denominated gold price," said
Nic Brown, analyst at Natixis in London.
Gold has also come under pressure after the European Central
Bank signalled in the previous session that it could cut
interest rates further, a move that will push the dollar even
higher and weigh on gold.
"The euro is likely to remain week, as the ECB will remain
accommodative longer than the Fed... And when combined with
relatively subdued inflation expectations on both sides of the
Atlantic, this is gold bearish," VTB Capital said in a note.
The benchmark 10-year U.S. Treasury yield rose
to its highest level since August 2011 at 2.67 percent earlier.
As gold pays no interest, the rise in returns from U.S. bonds
and other markets is seen as negative for the metal.
EXCHANGE-TRADED GOLD ADDS TO PRESSURE
Rapid outflows from gold exchange-traded products (ETPs) and
softer-than-expected physical demand were other reasons for the
weakness in gold.
Gold ETPs holdings fell by $4.1 billion in June and $28.2
billion year-to-date, according to data from BlackRock.
Indian consumption of gold has fallen since the country
imposed new import restrictions. Chinese buyers are sidelined,
waiting for prices to fall further, or at least stabilize.
The spot price of silver fell 3.7 percent to $18.79
an ounce. Platinum was down 1.0 percent to $1,324.99 an
ounce and palladium rose 0.5 percent to $677.97 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore;
editing by Catherine Evans, James Jukwey and Andrew Hay)