Gold headed for its biggest weekly decline since March on investor concerns over a potential pullback in central bank stimulus amid signs the recovery is gathering pace.
Bullion tumbled 2% Thursday as the dollar and Treasury yields rose following better-than-expected US data which added to speculation the Federal Reserve may bring forward the timeline for tapering bond purchases. Service providers expanded at the fastest pace on record last month, highlighting the ramp-up in business activity across the economy. American companies added the most jobs in May in nearly a year, according to the ADP Research Institute.
Still, New York Fed President John Williams said now is not the time for the US central bank to adjust its bond-buying program, though it makes sense for the officials to be talking through options for the future. That follows comments from his Philadelphia counterpart, Patrick Harker, who said it’s appropriate to “slowly, carefully” move back on purchases at a suitable time.
Gold has wobbled after jumping the most in 10 months in May as investors weighed risks including faster inflation and the uneven recovery from the pandemic. The main focus for traders on Friday will be the US nonfarm payrolls report for May, for clues on the strength of the labour market.
“A much stronger ADP private payrolls report suggests that Friday’s nonfarm payroll may also deliver positive surprises,” said Margaret Yang, a strategist at DailyFX. That’s strengthening the case for a tapering narrative, she said.
Spot gold dropped as much as 0.8% to $1 856.18 an ounce, the lowest intraday level since May 19, before erasing losses to trade little changed at $1 869.93 at 6:23 a.m. in London. Prices hit the highest level in almost five months on Tuesday, but have since retreated and are now down 1.8% this week. Silver, platinum and palladium fell. The Bloomberg Dollar Spot Index ticked up after surging 0.7% on Thursday.