Gold fell sharply on Friday, driven by a rising dollar after data showed the US economy created more jobs than expected over the last three months, lessening prospects the Federal Reserve will keep interest rates low for an extended period. Employers added 227,000 jobs to their payrolls last month, the Labour Department said on Friday, while the unemployment rate held at a three-year low of 8.3 percent - even as more people returned to the labour force.
It also revised numbers higher for December and January. Spot gold fell 1.1 percent on the day to $1,681.24 an ounce by 1435 GMT, having fallen by 1.8 percent so far this week, set for a second consecutive weekly decline. "This is another nail in the QE coffin, and as such is non-supportive for gold," Ole Hansen, senior manager at Saxo Bank, said. "Confidence has been shaken this week, and it looks like more long liquidation lies ahead.
The gold price has risen by around 8.6 percent so far this year, building on 11 consecutive years of increases, fuelled by low inflation-adjusted interest rates and trillions of dollars' worth of cheap cash from central banks to prevent the financial system from seizing up.
Investors interpreted last week's testimony from Fed Chairman Ben Bernanke on the outlook for the economy as a signal that there was little chance of further liquidity injections in the form of QE. Ample liquidity tends to anchor interest rates and in the case of US rates, tempers the dollar, thereby giving gold a boost.
Gold's correlation to the euro/dollar exchange rate touched its highest in over two years this week, meaning the bullion price is more likely to respond to fluctuations in the single European currency than in risk appetite. Reflecting investor demand for the metal, holdings of gold in exchange-traded products (ETPs) have risen to record highs above 70 million ounces this week.
Spot silver fell 1.8 percent to $33.24 an ounce, keeping the gold/silver ratio, or number of ounces of silver needed to buy one ounce of gold, to 50, broadly unchanged from the start of the week. Platinum, which has fallen almost 2 percent this week, was down 0.5 percent on the day at $1,649.49 an ounce. The discount of platinum to gold has retreated to around $40 an ounce from closer to $65 an ounce at the start of this week, highlighting platinum's outperformance over gold. Palladium fell 1.3 percent to $690.47 an ounce, shrugging off supportive news of a sharp rise in Chinese vehicle sales last month.