Gold falls as dollar strengthens

London: Gold fell on Friday, pressured by gains in the dollar ahead of a closely watched jobs report that will give the last major signal on the state of the world’s largest economy before US elections next week, and could set the tone for monetary policy.

The dollar rose to a near four-month high against the yen and a near three-week high against the euro as investors bet on an upbeat report after private employers added jobs at the fastest pace in eight months.

Spot gold was at $1,709.26 at 1102 GMT, down 0.63 per cent, while US gold futures for December fell $5.80 to $1,709.70. In the short term, it could benefit from a positive reading of the US jobs market.

“The stronger dollar is bringing down a number of markets including gold,” Standard Chartered analyst Daniel Smith said.

He said the payroll data was likely to show strong job creation after a recent run of positive US economic data, which augured for a weaker dollar and higher gold prices.

“More surprising than not, we’ll see good numbers today, and generally that will be pro-risk -- I think we’re going to see higher metals prices and higher gold on the back of that, because the dollar is likely to weaken.”

But in the longer term, a positive reading could weigh on gold if it trims expectations for monetary easing. The US authorities have explicitly tied the extent of monetary stimulus measures - news of which sent gold above $1,795 an ounce in October - to the health of the jobs market.

Looser monetary policy stokes longer-term inflationary fears and maintains pressure on interest rates, both good for gold.

“A downside surprise in non-farm payrolls is likely to help fuel a gold rally, in our view,” HSBC said in a note.

Gold importers in India, historically the world’s biggest gold consumer, rushed to stock up ahead of major festivals after prices of the metal fell to their lowest in nearly a month.

India is approaching the height of its festival season, with the Diwali and Dhanteras later this month. Gold is a key part of gifts and is used for dowries at weddings, which are popular at this time of year.

Data released by the Istanbul Gold Exchange on Friday showed Turkey’s gold imports fell to 3.7 tonnes in October from 7.49 tonnes a year earlier, and 3.84 tonnes in September.