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Gold has worst day since Dec. 2013, erases year's gains

Commodities next week: Gold's $30 drop

Gold had its worst day since December 2013 on Friday after better-than-expected U.S. non-farm payrolls fueled speculation the Federal Reserve will raise rates sooner rather than later.

Nonfarm payrolls rose 295,000 last month after downwardly revised 239,000 gain in January, the Labor Department said on Friday.

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U.S. gold for April delivery closed 2.7 percent lower at $1,164.30 an ounce, its lowest level since December 2013. The metal has wiped out this year's gains.

Going for the gold ... miners

The dollar hit an 11-1/2 year high against a basket of major currencies, gaining more than 1 percent after U.S. jobs data and bolstered by bolstered by strong U.S. government bond yields.

A stronger U.S. currency makes dollar-denominated gold more expensive for holders of other currencies, while the rise in returns from U.S. bonds is negative for the metal, which pays no interest.

"The outcome was stronger than the forecast, there is a strong argument to increase rates, we can see that one with a stronger dollar and with the selloff in precious," Societe Generale analyst Robin Bhar said.

"If we close below January levels, then the most obvious downside would be November's lows of $1,131, obviously there would be big figure support around $1,150."

Markets believe that the strong report could prompt the Fed to soon increase U.S. interest rates, a move that would further boost the dollar, in turn hurting demand for non-interest-bearing assets such as gold.

"We continue to forecast a further strengthening of the U.S. dollar which will keep gold under pressure," Deutsche Bank said in a note.

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On the physical market, prices on the Shanghai Gold Exchange suggested physical demand for gold in China, the second biggest bullion consumer, remained at healthy levels.

Chinese gold prices were about $4-$5 an ounce higher than the global benchmark.

Sustained interest for physical bullion typically gives support to prices, cushioning any downside pressure.