Employment gains push down gold

December 5, 2014 03:26 AM

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Gold (COMEX:GCG15) prices slumped after U.S. employers added more workers than forecast last month, easing pressure on the Federal Reserve to maintain lower interest rates.

Employers in the U.S. added 321,000 jobs in November, the most since January 2012. The advance in payrolls exceeded the most optimistic projection in a Bloomberg survey of economists.

Bullion fell to a four-year low last month on waning demand for the metal as a store of value. Gains for the U.S. economy have sparked concern that the Fed is moving closer to raising borrowing costs. The outlook for higher interest rates erodes the allure of the metal, which generally offers investors returns through increasing prices.

“A selloff in gold is inevitable with these kind of numbers,” Chris Gaffney, the senior market strategist at EverBank Wealth Management in St. Louis, said in a telephone interview after the report. “This tells us rates will rise sooner rather than later.”

Gold futures for February delivery dropped 1.1% to $1,194.30 an ounce at 8:32 a.m. on the Comex in New York. Prices touched $1,130.40 on Nov. 7, the lowest since 2010.

Holdings in global exchange-traded funds backed by bullion are at the lowest since 2009, heading for a seventh straight week of declines. Investor demand for precious metals has waned amid a rally for equities and the dollar and as inflation remained low.

Prices climbed 70% from December 2008 to June 2011 as the Fed bought debt and held borrowing costs near zero percent in a bid to shore up economic growth. The metal in 2013 tumbled 28%, ending a 12-year bull run.

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