Investing.com -- Gold crashed more than 2%, suffering its worst one-day fall in more than two months, as the dollar firmed on Monday amid indications that the Federal Reserve may disregard a soft U.S. jobs report from late last week and warnings from Japan's finance minister that the government could intervene in foreign exchange markets if necessary.
On the Comex division of the New York Mercantile Exchange, gold for June delivery traded in a broad range between $1,264.50 and $1,289.55 an ounce before settling near session-lows at $1,266.95, down $27.05 or 2.09% on the session. Gold erased all of its losses from Friday's session when it soared more than 1.65% to hit near 15-month highs. Despite Monday's massive sell-off, the precious metal is still up by approximately 20% since the start of the year and is on pace for one of its strongest first halves in more than a decade.
Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,322.10, the high from August 8, 2014.
Minutes from the Bank of Japan's March meeting, released on Monday, revealed a policy board sharply divided on its path for future interest rate setting, as tensions remained high following the central bank's shocking decision weeks earlier to lower interest rates into negative territory for the first time in history. At the time, BOJ governor Haruhiko Kuroda cited increased risks related to the Chinese and Emerging Markets slowdown, as well as widespread volatility in global financial markets for the decision. At the two-day meeting on March 14-15, however, some policymakers of the nine-member board noted that Kuroda's positioning caused "excessive expectations for further easing," and led to increased volatility in financial markets.
Last week, the dollar touched down to an 18-month low against the yen at ¥105.55, prompting the U.S. Treasury Department to add Japan to a watch list of countries that may use price movements in their currencies as a way of gaining an unfair advantage over the U.S. in certain trade deals.
"For Japan, excessive volatility in yen moves that affect Japan's trade, economic and fiscal policies - be it yen rises or yen falls - is undesirable. If such moves occur, Japan is ready to intervene in the market," Japanese Finance Minister Taro said in a speech before parliament on Monday.
USD/JPY surged more than 1.25% to an intraday high of 108.60, before easing slightly in U.S. afternoon trading to 108.38. Despite the gains, the dollar has slid nearly 10% versus the yen since the start of the year.
Elsewhere, investors continued to digest a relatively weak jobs report last Friday after the U.S. Labor Department said that nonfarm payrolls increased by 160,000 in April, considerably below a downwardly revised gain of 209,000 in March and the lowest monthly total since last September. Investors, though, paid closer attention to solid hourly wages of 0.3%, in line with consensus estimates. Also on Friday, New York Fed president William Dudley reiterated that the Federal Reserve could raise interest rates as much as two times this year if the economy shows steady improvement.
Any rate hikes by the Fed in 2016 are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.30% to an intraday high of 94.18 before falling slightly to 94.11 early in the afternoon session. The index is still down approximately 6% since early-December. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for July delivery plummeted 0.497 or 2.84% to $17.030 an ounce.
Copper for July delivery fell 0.047 or 2.18% to $2.107 a pound.