(Updates with U.S. jobs data, refreshes prices)
By Amanda Cooper
LONDON Nov 4 Gold fell on Friday after data
showed the U.S. economy generated fewer than expected jobs last
month but enough to send unemployment to its lowest in six
months, which boosted the dollar and other risk-linked assets.
Spot gold fell 0.3 percent to $1,758.34 an ounce by
1337 GMT, but was set for a gain of 1 percent this week.
The U.S. Labor Department said 80,000 workers were added to
non-farm payrolls in October, below forecasts for a rise of
95,000, but the U.S. monthly employment report also showed the
jobless rate fell to 9.0 percent from 9.1 percent, its lowest in
"Gold would benefit from the idea of a euro zone break-up.
We don't think this is going to happen, but it's certainly not a
zero-probability event," said Deutsche Bank analyst Michael
"The risk for us is we start to see more euro weakness over
the next few months, that is probably our main concern," he
U.S. stocks opened down, Treasury prices edged higher and
the dollar rose nearly half a percent against a basket of
currencies on the back of the uncertain outcome of
Greece's sovereign debt crisis.
Gold's inverse relation to the dollar makes it more
profitable for non-U.S. holders of the metal to sell it.
Greek Prime Minister George Papandreou faces a knife-edge
confidence vote later on Friday, with the fate of the nation's
bailout in the balance.
Meanwhile, Italy agreed to allow the International Monetary
Fund and the European Union to monitor its progress in achieving
structural reform as yields on Italian debt stayed near levels
believed to be unsustainable for Rome's existing finances.
The European Central Bank delivered a surprise rate cut on
Thursday citing slowing growth and raised the chances of the
euro zone entering a mild recession towards the end of the year.
With the prospect of rates in the euro zone set to ease
further, gold should gain more competitive advantage over assets
that bear yields or dividends which can suffer in an environment
of loose monetary policy.
Real interest rates, those which strip out the headline rate
of consumer inflation, are in negative territory in more than
half of the Group of 20 richest nations, Reuters data shows.
"There are still more rate cuts to come and the interest
rate environment looks pretty constructive towards gold and risk
aversion and equity risk premia, which are rising rapidly,
continue to be constructive," said Deutsche's Lewis.
"So on the margins, we hold the view that gold would benefit
from tail-event protection," Lewis said, referring to events
that are considered to be unlikely, such as the breakup of the
euro zone, but that nonetheless should they come to pass, would
favour an asset such as gold.
According to the U.S. options market, traders are increasing
their bets on the price of gold moving lower in the near term,
as evidenced by a rise in holdings of put options.
Open interest in put options at $1,550 has more than doubled
to over 13,000 lots, accounting for more than 13 million ounces
of gold, in the last six weeks.
However, the bullish bets put on in September that the gold
price would have hit $2,000 or more by Nov. 22, the date of the
upcoming options expiry, have only been modestly scaled back and
most open interest in call options is centred at $2,000,
according to data from exchange owner CME Group.
Adding to the firmer tone of the gold market was more
evidence of central bank purchases of the metal. Data from the
IMF this week showed Thailand, Russia and Bolivia bought gold in
September. Thailand bought over 15 tonnes, making it the third
largest official purchaser of bullion this year.
The price of gold hit a record $1,920.30 an ounce in
September before subsiding to current levels.
"Gold's price correction in late September probably
encouraged more buying, but we do not think price is a very
significant factor for central banks who decide to increase
their gold holdings - after all, they were also willing takers
even when prices were near all-time highs in August," said UBS
strategist Edel Tully in a note.
"As gold continues to take its cues from the euro and risk
assets, consistent official purchases offers some comfort to
investors, as they help provide the yellow metal with underlying
support," she said.
Silver was down 0.5 percent on the day, trading
around $34.27 an ounce, platinum was off 0.4 percent to
$1,627.74 an ounce and palladium flat on the day at
(Reporting by Amanda Cooper; Editing by Jason Neely)