Favourable job data lifts dollar, clobbers gold value

New York: Gold broke from record highs to plunge five per cent and lead a broad fall in commodities on Friday as the dollar rallied on better-than-expected US jobs data that raised fears of an interest rate hike.

Both bullion and gold futures fell below this week's $1,200 per ounce peaks as the dollar soared on data showing US employers cut only 11,000 jobs last month versus a forecast for 130,000.

Gold is widely favoured as an alternative to currencies and prices of the precious metal had surged more than 30 per cent this year as the dollar plumbed 15-month lows against the euro.

"We've had a big move in a short period of time and it was clearly overbought," New York fund manager Caesar Bryan said, referring to gold.

"It was susceptible to a pullback. I don't think this is a surprise," added Bryan, who manages about $650 million in mutual fund assets at the Gamco Gold Fund.

Spot gold, which refers to trades done on bullion, fell below $1,155 per ounce by 2.30pm EST, versus Thursday's late quote of $1,207.10 in New York.

US gold futures' most-actively traded month, February, fell more than $60 to also trade below $1,155 per ounce.

If the latest jobs data sets a trend, the resulting economic recovery could embolden the US Federal Reserve to roll back near-zero interest rates and other loose monetary policies that have battered the dollar, analysts said.

"This will encourage the Fed to be more vocal about an exit strategy from their highly accommodative posture," William Sullivan, chief economist for JVB Financial Group in Florida, said.

US crude oil's benchmark front-month contract fell more than one dollar to trade just above $75 a barrel after briefly falling through that psychological support level.

CRB index

The drop in oil weighed on the Reuters-Jefferies CRB index, a basket of 19 commodities that has just under a quarter of its weightings in crude. The CRB slipped about one per cent to its lowest levels since Monday.

Oil has largely traded below $80 over the last month as an overhang in US crude stockpiles deterred energy bull hopes of taking the market nearer to $100 after bringing it up from just around $32 during the height of the recession this year.

But Saudi Arabia, the biggest oil exporter in the world, said on Friday it was happy with crude prices as they were.

"It's close to the target we set, it's almost $75," Saudi Arabian Oil Minister Ali Al Naimi said, adding that this suited both producers and consumers.

Modest fall

Copper fell modestly in London and far more in New York as investors digested the employment numbers and considered the potential impact from that on the dollar.

"The dollar is influential on metals prices on a short-term trading perspective," John Meyer, analyst at UK-based Fairfax said, adding that strong investment inflows coming into copper could, however, limit any negative impact from a dollar rebound.

Benchmark copper on the London Metal Exchange ended down $40, to $7,040 a tonne. Before the jobs data was released, the metal, used in construction and power generation, hit $7,170 on the LME— a level not seen since September 2008.

Among crop markets, sugar was one of the the biggest losers. Raw sugar fell almost three percent in New York, while London's white sugar fell about one per cent.