Futures & Commodities

Gold heads for biggest weekly drop in six months

Gold pared gains on Friday after data showed U.S. job growth rebounded in April and stayed on track for its biggest weekly loss in six months as expectations for a U.S. interest rate hike in June grew and euro zone political risk receded.

The dollar firmed against a basket of major currencies after the U.S. payrolls data, but its reaction was muted, with the euro near six-month highs before the French election on Sunday.

Spot gold was up 0.05 percent at $1,227.81 an ounce, little changed from late on Thursday and still set to end the week down 3.1 percent, its biggest weekly drop since November.

U.S. June gold futures inched down $1.70 to settle at $1,226.90.

"The U.S. employment (data) was stronger than expected," ABN Amro analyst Georgette Boele said. "This only put gold prices slightly under pressure, because the U.S. dollar didn't rally."

The U.S. Treasury yield curve flattened after the report showed jobs growth in April rebounded and the unemployment rate fell to a near 10-year low, reinforcing the view that the Federal Reserve is likely to lift interest rates again in June.

Gold bar and coins
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Gold hit a six-week low of $1,225.25 on Thursday after the Fed played down any threats to this year's planned rate increases, supporting forecasts of another move in June.

The metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

Concerns over a victory by far-right candidate Marine Le Pen in the French presidential election, which drove gold lower last month, have faded considerably. Sunday's vote is expected to elect centrist Emmanuel Macron, whom investors favor.

"Following six weeks of fund buying, gold was left exposed as geo-risks faded, but the fact that ETPs have seen limited selling appetite could be an indication that this was mostly speculative sellers reducing longs," Saxo Bank's head of commodities research, Ole Hansen, said.

Gold expert makes bull case for the metal

Holdings of gold exchange-traded products (ETPs) tracked by Reuters have held fairly steady during the recent sell-off, now standing less than 1 percent below April's near five-month high.

Spot silver fell 0.12 percent to $16.26, after hitting a four-month low of $16.17 in the last session. The metal has fallen 10 percent in the second quarter.

Platinum was up 0.75 percent at $905.75 an ounce. Palladium gained 1.24 percent to $814 an ounce. The spread between platinum and palladium was close to its narrowest in 15 years, having dipped below $100 an ounce this week.