February 2, 2018 / 1:07 PM / 8 months ago

PRECIOUS-Gold prices drop as dollar strengthens after U.S. jobs data

    * U.S. jobs, wages better than expected
    * U.S. 10-year Treasury yields post largest rise since June
2009
    * Palladium on track for biggest weekly drop since September
2017
    * GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

 (Recasts throughout; updates prices, headline; adds comment,
NEW YORK to dateline)
    By Renita D. Young and Jan Harvey
    NEW YORK/LONDON, Feb 2 (Reuters) - Gold prices declined on
Friday as the U.S. dollar ticked up against the euro after U.S.
jobs data showed a robust rise in jobs and wages and 10-year
U.S. Treasury yields peaked.
    Non-farm payrolls rose by 200,000 jobs in January, the U.S.
Labor Department said, beating expectation of 180,000 and their
largest annual gain in more than 8-1/2 years. Average hourly
earnings rose and boosted the year-on-year increase to 2.9
percent, the largest rise since June 2009.             
    "The hawkish reading of the data is proving to be a trigger
point for more downside pressure in gold in the short-term,"
said Suki Cooper, precious metals analyst at Standard Chartered
Bank.
    Spot gold        dropped 1 percent at $1,335.26 an ounce by
1:34 p.m. EST (1834 GMT), while U.S. gold futures        for
April delivery settled down $10.60, or 0.8 percent, at
$1,337.30.
    Benchmark 10-year Treasury yields             extended their
rise to more than 2.8 percent reaching a 4-year high after the
U.S. jobs data was released.
    "The fact that it's gone up that fast that quick could force
the Fed to act more aggressively before the March meeting if the
10-year gets to three percent," said Bob Haberkorn, senior
market strategist at RJO Futures.
    Higher interest rates make gold less attractive to investors
because it does not pay interest. 
    The Fed held interest rates unchanged after its latest
policy meeting this week but raised its inflation outlook and
flagged "further gradual" rate increases.             
    Gold is set to end this week 1.1 percent lower, after rising
in six out of the last seven weeks and hitting its highest in 17
months last week at $1,366.07. 
    On the wider markets, world stocks were set to post their
biggest weekly drop since late 2016 as talk of central bank
policy tightening and expectations of higher inflation boosted
borrowing costs globally.            
    Holding gold offers a degree of insurance if the broader
market suffers a correction, ScotiaMocatta said in a monthly
report this week. "Record-setting global equities may well start
to wobble if inflation starts to pick up, or if bond
yields/interest rates continue to rise," it said. 
    Silver        dropped 2.9 percent at $16.73 an ounce after
hitting $16.66, its lowest since Dec. 28. It was poised for a
3.8 percent weekly decline.
    Platinum        declined 1.2 percent at $993.50 per ounce,
on track for a 1.6 percent weekly drop.
    Palladium        rose 0.6 percent at $1,043.50 per ounce.
    After hitting record highs this month, palladium is on track
for its biggest weekly drop since early September, down 4.2
percent. 

 (Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by David Evans and Cynthia Osterman)
  
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