Gold Slumps to 7-Week Low as Investors Abandon Havens After Jobs Shock

By Geoffrey Smith

Investing.com -- Gold prices slumped to a seven-week low on Friday as a much stronger-than-expected labor market report sent money flooding back into risk assets and out of havens.

By 11:30 AM ET (1530 GMT), gold futures for delivery on the Comex exchange were down 2.7% at $1,680.40 a troy ounce, while spot gold was down 2.1% at $1,677.78 an ounce.

Other precious metals fared similarly badly, with platinum futures falling 4.3% to $827.80 an ounce and silver futures falling 3% to $17.52.

Copper futures, by contrast, powered ahead by 2.5% to $2.56 a pound

Earlier, the Bureau of Labor Statistics had said U.S. nonfarm payrolls rose by 2.509 million in the month to mid-May, a figure far above even the most optimistic projections ahead of time. Analysts warned against reading too much into the news, given that employment levels are still only where they were back in 2011, but were content to recognize some scarce good news for the economy.

Gregory Daco, an analyst with Oxford Economics, said the numbers were at odds with more recent data from showing initial and continuing jobless claims still running at a high rate at the end of May.

Gold wasn’t alone in being punished by the data: the yield on the U.S. 10-year note rose 11 basis points to 0.93%, while the two-year yield rose as bulls abandoned any residual hope of the Federal Reserve pushing official rates below zero to support the economy.

Havens were also on the retreat in Europe, which according to World Gold Council has accounted for around one-third of the flows into gold-backed ETFs so far this year. The 10-year German yield rose to -0.27%, its highest since late March, in the wake of the European Central Bank’s decision on Thursday to add 600 billion euros to its emergency bond-buying program and stretch its purchases through the middle of next year.

Earlier Friday, chief economist Philip Lane followed up Lagarde’s message that the ECB would continue to backstop “fragile” markets, indicating a commitment to the bonds of fiscally weaker eurozone members, strengthening their relative attractiveness vis-à-vis gold.

"This fragility underlines the continued need for the central bank to be flexible and exercise a market stabilisation function to the extent necessary,” Lane said.

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