Gold is flat as positive U.S. jobs data boosts dollar

Gold was flat on Friday, reversing course as better-than-expected U.S. employment data bolstered the dollar, putting bullion on course for a weekly decline of more than 2%.

Spot gold erased early and traded flat at $1,930.11 per ounce. U.S. gold futures settled $3.50 lower at $1,934.30.

“Gold’s correlation with the dollar has been elevated, especially over the past couple of weeks and bullion is being weighed down by the bounce in the greenback following the solid report, especially the unemployment rate,” said Tai Wong, head of base and precious metals derivatives trading at BMO.

The dollar index was up 0.5%, putting it on track for its best week since early April and making the metal expensive for holders of other currencies. Data showed nonfarm payrolls increased by 1.371 million jobs in August. The unemployment rate fell to 8.4% from 10.2% in July.

“However, this data does not change the U.S. Federal Reserve’s stand on more stimulus to be pumped into the economy and its take on tolerating a higher inflation rate, keeping gold supported in the long run,” said Michael Matousek, head trader at U.S. Global Investors.

The metal has gained over 26% so far, helped by near-zero interest rates globally and easy monetary policy, especially from the Fed, and safe-haven demand driven by a clouded economic picture due to the coronavirus pandemic.

“This restive $1,900-$2,000 range should resolve ultimately higher especially with the Fed now officially elevating employment over inflation in the medium term. The practically permanent highly accommodative policy and intense election uncertainty will severely limit the attractiveness of USD,” BMO’s Wong said.