January 6, 2012 / 3:26 AM / 7 years ago

Gold eases as market digests U.S. payrolls data

NEW YORK/LONDON (Reuters) - Gold eased on Friday, snapping a five-session winning streak, but trade was choppy as investors digested a report of better U.S. job growth and the unemployment rate near a three-year low.

Gold and silver bars are pictured in front of a safe door at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011. REUTERS/Lisi Niesner

The metal still notched its biggest weekly gain in five weeks after it broke ranks with a slumping euro in the last two days. Bullion has now more than recouped last week’s losses that briefly sent it into bear market territory.

Trading volume was decent after data showed U.S. nonfarm payrolls increased 200,000 in December and the unemployment rate dropped to a near three-year low of 8.5 percent, offering the strongest evidence yet the economic recovery was gaining steam.

“Gold came under pressure because people are a bit more comfortable with the recovery of the economy, but it is going to remain rangebound until we get some significant news to push it into either direction,” said Fred Schoenstein, metals trader at Heraeus Precious Metals Management.

Spot gold fell 0.3 percent to $1,617.19 an ounce by 2:32 p.m. EST (1932 GMT).

It was up 3 percent for the week, its first weekly rise since early December.

“Gold went up after a lot of year-end liquidation last week. Money managers have to put their (gold) position back if they want to have it in their portfolio to show it to their clients,” said Schoenstein.

U.S. gold for February delivery settled down $3.30 at $1,616.80.

Trading volume was strong for a fourth straight day, about 10 percent above its 30-day average, preliminary Reuters data showed. Analysts said high turnover signaled renewed buying interest after gold fell sharply in thin holiday volume.

The euro hit a near 16-month low against the dollar and briefly traded below $1.27, the first time since September 2010, on renewed sovereign funding concerns in Europe and worries about a recession there.

Gold had been trading in lockstep with the euro in the past two months when the metal crossed into a bear market. Last week, the precious metal was briefly 20 percent below its record September high.

The 25-day correlation log between spot gold and euro was near a one-year high reached last week, indicating a strong positive link between the two in the last month.

“Although gold seems to be decoupling from the euro...we believe gold’s inverse correlation with the dollar and positive correlation with the euro will be re-established,” James Steel, HSBC’s chief commodity analyst, said in a research note.


Analysts expect gold prices to rise for a 12th year in a row and to reach a record high in 2012, but are less optimistic for silver and platinum, according to a survey by the London Bullion Market Association.

Fear among investors over the debasement of so-called fiat currencies such as the dollar, the euro or the Swiss franc, together with the euro zone debt crisis and the bullish impact of ongoing central bank buying were major drivers for gold.

A collapse of the euro and break-up of the European Union would have catastrophic consequences for the global financial system, billionaire investor George Soros said at a business school event in India.

However, two major bullion banks HSBC and Barclays earlier this week lowered their gold price forecasts for 2012 after the metal’s decline last week.

Spot silver fell 1.9 percent to $28.72 an ounce, headed for a weekly climb of nearly 4 percent — its biggest rise in a month.

Platinum group metals fell, with platinum down 0.9 percent for the day to $1,397.40 an ounce, and palladium dropped 3.9 percent to $610.43 an ounce.

Editing by Bob Burgdorfer

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