The price of Gold dropped below $1,200 an ounce on Friday, heading for a fifth weekly decline and recording its worst day since December 2013. The drop totally erased all gains recorded since the start of the year.
Spot gold was down 0.2 per cent at $1,195.70 an ounce, hitting a 10-day low of $1,192.25 in earlier trading and ended the week down by about 1 per cent.
US gold for April delivery was down 2.7 per cent an ounce at $1,164.30.
The drop on Gold prices followed the report of better-than-expected U.S. non-farm payrolls which reached 295,000 last month. Analysts expected US payrolls to have increased 240,000 last month and the jobless rate to have inched down to 5.6 per cent from 5.7 per cent.
"Strong NFPs may send gold falling sharply and swiftly, possibly to $1,180, followed by a slight dead cat bounce. Any number above 250,000 would likely have this effect," said Howie Lee, investment analyst at Phillip Futures. “But the metal could rally to $1,230 if the figure comes in below 230,000.”
The dollar rose towards 11-year highs, up more than 1 per cent after the release of U.S. jobs data and strengthened by strong U.S. government bond yields. The U.S. currency was also helped by weakness in the euro, which remained under pressure after the European Central Bank said it would start its 1-trillion euro bond-buying program next week.
Increased speculation of the Fed’s interest rate rise brought both the NASDAQ and S&P indexes tumbling down on Friday after weeks of record highs not seen in years.
Foreign Markets
At the same time, foreign markets believe that increased U.S. interest rates could further boost the dollar. 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.
Asian markets have not felt the effect yet. Prices on the Shanghai Gold Exchange suggested physical demand for gold in China, the second biggest bullion consumer, remained at healthy levels with Chinese gold prices at about $4-$5 an ounce higher than the global benchmark.
And in the Eurozone, gold analysts anxiously await the Fed decision, foreseeing a continuation of lower gold prices. According to one analyst at Deutsche Bank, "We continue to forecast a further strengthening of the U.S. dollar which will keep gold under pressure."