Gold retains losses on the back of strong US jobs data, stocks drag

By A. Ananthalakshmi

SINGAPORE (Reuters) – Gold was mostly unchanged on Friday, holding on to its losses from the previous session, and could see a further drop in prices as strong U.S. jobs data and record highs on Wall Street dent the precious metal's safe-haven appeal.

U.S. employment growth jumped in June and the jobless rate closed in on a six-year low, decisive evidence of a brisk economic growth heading into the second half of the year.

The data stoked fears that the U.S. Federal Reserve could hike interest rates earlier than expected, curbing gold's appeal as a hedge against inflation, traders said.

"Liquidity is again thin today because of the U.S. holiday. But when we see bigger volumes from Monday, gold will resume its decline as long positions are unwound," a precious metals trader in Tokyo said. U.S. markets are shut on Friday for the Independence Day holiday.

Spot gold was flat at $1,319.44 an ounce at 0320 GMT. It fell more than 1 percent to a one-week low of $1,309.64 on Thursday, before recovering slightly to close down 0.6 percent.

Strength in the dollar after the promising job data also dragged down gold by making the greenback-priced metal more expensive for holders of other currencies.

Asian shares were close to a three-year high, after Wall Street scaled fresh record highs on Thursday. The dollar index was near a 1-week high.

Reuters technicals analyst said gold may retrace to $1,298 as it has pierced below a support at $1,316.

But gold still looked set to post its fifth straight weekly gain, although a small one, as geopolitical tensions in the Middle East and Ukraine supported prices.

Among other precious metals, palladium was trading near its highest since 2001. The metal climbed for a ninth straight day on Thursday, hitting a 13-year high of $864.45.

Palladium, which along with platinum is used for autocatalysts, was boosted by data earlier in the week that U.S. auto sales hit an eight-year high in June.

The strong demand from the auto industry amid worries about from major producer South Africa, which until recently faced a five-month long strike, was pushing up prices, traders said.