Reuters

Gold prices extended losses to slide nearly 1% on Friday as an encouraging U.S. jobs report eased recession worries and raised hopes the Federal Reserve will stick to its aggressive tightening path.

Spot gold fell 0.92% to $1,774.97 per ounce, while U.S. gold futures eased 0.87% to $1,791.1.

“Gold had recently rallied on the thought that the Fed will shift from hawkish to dovish. But the jobs data shows the U.S. economy is strong and this can prompt Fed to be more aggressive, which is not a good story for gold,” said Bart Melek, head of commodity strategies at TD Securities.

A high-interest rate environment hurts bullion as it yields no interest.

U.S. employers hired far more workers than expected in July, with the unemployment rate falling to a pre-pandemic low of 3.5%.

A positive employment picture gives the Fed further scope for future rate rises without risking tipping the economy into recession, and gold’s upside gains are likely to be capped at $1,800, Rupert Rowling, market analyst at Kinesis Money, said in a note. The dollar index was up 1.1%, making gold more expensive for overseas buyers, while U.S. Treasury yields extended their rise after the data.

On the physical side, gold premiums in China rose this week on safe-haven demand driven by rising tensions with the United States over Taiwan.

“If there is a pop-up in geo-political issues, then this will help gold, but it won’t be a sustained rally … The next catalyst for gold prices will be (the) U.S. CPI print coming out next week,” Melek added, referring to consumer prices.