Gold Drops 1% as Dollar and Bond Yields Rise

Gold prices fell 1% on Friday after stronger-than-expected U.S. jobs data bolstered expectations that the Federal Reserve (the U.S. central bank) may keep interest rates at higher levels for longer, driving up the dollar and Treasury yields.

Spot gold fell 1% to $4,047.10 per ounce by 1346 GMT, after hitting an intraday low of $4,033.29 per ounce earlier in the session.

Spot gold rose 4.5% over the week, on track for its best weekly performance since late August.

The dollar rose 0.7% to its highest level since October 29, making dollar-denominated gold more expensive for holders of other currencies, while yields on the benchmark 10-year U.S. Treasury also rose.

Independent metals trader Tai Wong said, “Gold fell sharply following a jobs report that was strong across the board, but it is trying to recover and rise again. This is a critical test for the price gains seen this week.”

U.S. non-farm payrolls rose more than expected in October, and the unemployment rate fell to 4.1%, indicating that the labor market remains strong and giving the Federal Reserve greater scope to focus on inflation driven by the conflict in the Middle East.

CME Group’s FedWatch tool shows that traders currently expect a 74.8% probability that the U.S. central bank will raise interest rates in December, up from about 72.8% before the jobs report was released.

Among other precious metals, spot silver rose 0.3% to $51.92 per ounce, platinum gained 0.5% to $1,524.03, while palladium fell 1.6% to $1,015. All three metals are on track for weekly gains.