Gold drops over $40, suffers fourth weekly loss

Gold futures dropped more than $40 an ounce Friday to mark their fourth weekly loss in a row after the government reported that nonfarm payrolls rose more than expected in October, providing a further boost to the U.S. dollar.
Gold for December delivery (US:GCZ2) sank $40.30, or 2.4%, to settle at $1,675.20 an ounce on the Comex division of the New York Mercantile Exchange after touching a low at $1,674.80.
Gold futures had been trading around $1,708 right before the Labor Department said that nonfarm payrolls rose by 171,000 in October, an increase higher than the 120,000 that economists had expected.
Also, more people were hired in the prior two months than previously believed, according to the government’s data. However, the October unemployment rate — derived from a separate survey — edged up to 7.9% from 7.8%, as expected.
Gold tested $1,700 twice last week, so it was always vulnerable to a strong nonfarm [payrolls] report,” said Ben Traynor, chief economist at BullionVault. “The move takes us back to where we were just after [Fed Chairman] Ben Bernanke’s Jackson Hole speech at the end of August, and offers further confirmation that September’s QE3 buzz has now well and truly worn off.”
The gold market is also beginning to think about when the Fed will change monetary policy and questioning the “validity of the asset reflation thesis,” said Vedant Mimani, lead portfolio manager of the Atyant Capital Global Opportunities Fund.
“We believe this re-think process is just getting started,” he said.
The jobs data further buoyed the dollar, weighing on gold futures. A stronger dollar tends to pressure prices for dollar-denominated commodities such as gold since it makes them more expensive for holders of other currencies to buy.
The ICE dollar index (US:DXY), which gauges the greenback’s performance against a basket of six major global currencies, climbed to 80.538 from 80.052 late Thursday.
Against this backdrop, other metals futures settled broadly lower, with silver leading the way. Silver for December delivery (US:SIZ2) fell $1.39, or 4.3%, to end at $30.86 an ounce. Prices, which hadn’t settled below $31 since late August, saw a 3.7% loss for the week.