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Gold Down 2% as Dollar Rises after Jump in U.S. Data

Gold prices fall by more than 2% Thursday to drop below a key resistance level as the U.S. dollar strengthened following a jump in U.S. private-sector payrolls data for May .

U.S. private-sector employment surged by 978,000 in May, according to the ADP National Economic Report released Thursday. That was well above the rise of 680,000 forecast by economists surveyed by The Wall Street Journal.

Government data, meanwhile, showed U.S. Initial weekly jobless claims dropped for a fifth week in a row, by 20,000 to 385,000.

“Job growth is key to the short term trend in the greenback, as well as the gold price,” said Chintan Karnani, director of research at Insignia Consultants, in a market update.

Following the data, the ICE U.S. Dollar Index rose 0.5%. A stronger dollar can make assets priced in the currency such as gold less attractive to overseas buyers.

Still, Karnani questioned whether gold has formed a short-term top following the ADP jobs data, and said that would depend on the nonfarm payrolls numbers due out Friday.

If the May NFP rise tops 700,000, “along with other positive parameters, then gold will form a short-term top,” he said.

Economists forecast an overall increase of 671,000 new jobs in May in the Labor Department data due Friday.

In Thursday dealings, gold for August delivery fell 2.2%, or $41.20, to $1,868.70 an ounce after settling at $1,909.90 on Wednesday. The most-active contract is poised to settle under the key technical level of $1,900, a level it breeched on May 26, for the first time since January.

“Following the strong run up since April, gold’s ability to withstand correction/consolidation pressures highlights the return to the buy side of long-term trend following funds, many of which build up short positions following the August peak,” said Ole Hansen, head of commodity strategy at Saxo Bank, in emailed comments.

“Still the risk of a deeper correction remains in our opinion the biggest short-term risk,” Hansen added. He cited support for gold at $1890, $1,865, then $1,842, with resistance at $1,916, $1,924 and $1,940.

July silver meanwhile, fell 95 cents, or 3.4%, to $27.26 an ounce.

Gold had moved higher in electronic trading on Wednesday after the release of Federal Reserve’s Beige Book, which indicated inflationary pressures are still building.

Viewed as a traditional hedge against inflation, gold and other precious metals have been on a trek higher amid investor worries about inflation and how the Fed might respond. The U.S. economy, in particular, has come roaring back from the pandemic, but with signs of inflation building.

On Wednesday, Philadelphia Fed President Patrick Harker said that it was time to start thinking about discussing the time frame for scaling back the Fed’s $120 billion a month asset-purchase program. That’s as the Federal Reserve said Thursday it will sell its corporate bond portfolio acquired during the pandemic.

Among other metals, July copper  shed 2.5% to $4.48 a pound. July platinum lost 3.2% to $1,155 an ounce, and September palladium  fell 1.4% to $2,824 an ounce.

Source: Marketwatch

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