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Gold futures plunge below $1,165, erasing all gains for 2015

CommoditiesMar 06, 2015 01:50PM ET
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The price of gold futures fell more than $30 on Friday -- Gold suffered its biggest loss in the calendar year on Friday after better than expected data from the monthly U.S. jobs report and a stronger dollar deepened concerns that the Federal Reserve could raise interest rates by June.

On the Comex division of the New York Mercantile Exchange, gold future prices for April delivery fell $32.40 or 2.71% to $1,163.80 a troy ounce in U.S. afternoon trading. It marked the steepest decline in gold future prices since December, 2013.

Previously, the biggest drop of the year came on Jan. 29 when gold futures plunged $31.30 to close at $1,255.90.

The decline on Friday erased all of the gains in gold futures for 2015, as it closed on the final day of trading last year at $1,184 an ounce.

Coincidentally, investors unloaded the precious metal in late-January after the Fed released a statement that the economy had been expanding at a solid pace and that it would remain patient in deciding when to increase its benchmark rate. Prices for gold futures had fluctuated between $1,194.60 and $1,223 since Federal Reserve Chair Janet Yellen's dovish testimony before Congress on Feb. 24.

At Yellen's semi-annual Humphrey-Hawkins testimony on Capitol Hill, she indicated that the Fed could consider an interest rate hike on a "meeting by meeting" basis if economic conditions improved and inflation moved toward its target rate of 2%. The Fed could alter its monetary policy stance when the Federal Open Market Committee meets next on Mar. 17-18.

Higher interest rates are a troubling sign for gold, which struggles to compete with yield-bearing investment strategies when the Federal Reserve tightens monetary policy. The yield on 10-year U.S. treasuries increased 6.91% or 0.146 to 2.256 on Friday. For the year, the treasury notes are up nearly 15%.

The U.S. added 295,000 jobs in February, according to the U.S. Bureau of Labor Statistics, more than 55,000 above forecasts for the month and January's figure of 239,000. Employment growth, meanwhile, has averaged 288,000 over the last three months, as the current unemployment rate fell from 5.7 to 5.5%.

Data concerning wage growth was less promising, as weekly hourly wages inched up three cents from January and 2% from this point last year. The Fed would like to see improved figures in terms of wage growth if it decides to raise interest rates, Yellen added at last month's testimony.

The jobs report pushed the U.S. dollar broadly forward against a basket of currencies, as the U.S. Dollar Index soared 1.36% or 1.31 to 97.71.The euro also reached an 11-year low against the dollar for the third consecutive day, dropping 1.62% or 0.178 to 1.0850. The euro is down more than 10% against the U.S. dollar this year.

A strengthening dollar affects dollar-denominated commodities like gold by making it more expensive for holders of other currencies to purchase the metal.

The decline, however, paled in comparison from the sell off on April 15, 2013 when gold lost $140.30 or 9.3% to close at $1,361.10.

Silver futures, meanwhile, for May delivery also fell 0.35 or 2.17% to trade at 15.81 a troy ounce.

Copper delivery for May decreased 0.044 or 1.65% to $2.609 a pound.

Gold futures plunge below $1,165, erasing all gains for 2015

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Comments (1)
Spidey Sense
Spidey Sense Mar 06, 2015 2:00PM ET
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Funny that as the predictions leading up to Friday's jobs numbers were to be a disappointment not an improvement. Anyone in an option would have made off like a bandit. How shall we say misleading the public, making a wrong prediction, not seeing unknown factors, not taking all factors into consideration, better yet how about just lying.
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