Gold extended its slump, and silver tumbled, after a stronger-than-expected US jobs report fueled bets that the Federal Reserve may start paring back its massive monetary stimulus soon.
Spot bullion fell more than 4% and silver slumped as much as 7% as the selloff following Friday’s employment figures initially accelerated at the start of Asian trading. Dallas Fed President Robert Kaplan said the central bank should start tapering its asset purchases sooner rather than later, and in a gradual manner, fanning expectations that stimulus will be reined in.
The jobs data “beat expectations by a mile last week, which led to both gold and silver selling off into the close. This morning we are seeing the overhang of that as perhaps those traders a bit late to the party are panic-selling the open,” said John Feeney, business development manager at Guardian Vaults. “With low liquidity at this time of the week combining with a large number of stop losses being triggered we have seen a volatile open to start the week.”
The sharp losses swiftly cooled. Bullion traded 1.5% lower at US$1,737.37 an ounce by 9:21 a.m. in Singapore after earlier touching its lowest since March, and coming close to its lowest in more than a year. Silver was down 1.9% at US$23.8595 an ounce.
Gold has been losing ground on investor concern that an improving US economy and rising inflation will spur the Fed to pull back on unprecedented economic support. Low rates help make bullion more competitive against assets that offer yields, while the strengthening dollar and record equity markets are also curbing demand for the haven metal.
It’s “a bit too early to tell, but this sort of capitulation usually coincides with a significant low in the market,” said Feeney. Though “we are seeing demand for physical metals coming through this morning on the buy side.”
In other markets, palladium added 0.2% and platinum fell 1.2%. The dollar held an advance, while yields on 10-year U.S. Treasuries rose on Friday.
