Gold Gives Back 2014 Gains As Strong NFP Makes Case for Rate Hike

Gold erased this year’s gains after U.S. employers added more jobs in September than forecast, stoking speculation that the Federal Reserve will move closer to raising interest rates.

Futures for December delivery fell as much as 1.4 percent to $1,198.40 an ounce in New York, the lowest since Dec. 31 and falling below $1,200 for the first time this year. A decline in 2014 would cap the first back-to-back annual losses for the metal since 1998. Prices tumbled 28 percent last year, the most in three decades.

An accelerating American economy means investors are shunning gold even after the U.S. expanded sanctions against Russia and ramped up its military campaign to combat Islamic State in Iraq. Rising interest rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value.

“Strengthening payrolls are going to add to the perception that the Fed is going to raise rates sooner,” Charlie Bilello, who helps oversee $220 million as director of research at Pension Partners LLC in New York. “The perception is that a more hawkish Fed is negative for gold.”

Gold futures for December delivery fell 1.1 percent to $1,201.40 an ounce at 9:02 a.m. on the Comex in New York. A close at that price would leave the metal down 0.1 percent this year.

The 248,000 gain in payrolls followed a 180,000 August increase that was bigger than previously estimated, the Labor Department said today. The median forecast of economists in a Bloomberg survey called for a 215,000 advance. The unemployment rate fell to the lowest level since July 2008.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza