Gold Slumps Most in Five Weeks as U.S. Payrolls Top Estimates


neal bhaiGold futures slumped the most in five weeks as U.S. employers added more workers than projected last month, reducing pressure on theFederal Reserve to slow the pace of tapering monetary stimulus.

The 175,000 gain in employment compares with a 149,000 advance forecast by a Bloomberg survey of economists, government data showed today. Unemployment rose to 6.7 percent from 6.6 percent as more people entered the labor force and didn’t find work. The Fed, which meets March 18-19, announced a $10 billion reduction in bond buying at each of its past two meetings, leaving purchases at $65 billion.

Through yesterday, gold rose 12 percent this year on demand for a haven amid turmoil in Ukraine and concern that the U.S. economy is faltering. In 2013, the metal tumbled 28 percent, the most since 1981, as U.S. equities surged to a record and the inflation rate remained low.

“The fear trade will fade as today’s employment figures shows that the economy is improving,” Lance Roberts, who oversees $600 million as chief executive officer of STA Wealth in Houston, said in a telephone interview. “The headlines from Russia will continue to support gold, but there is not much steam left in the rally.”

Gold futures for April delivery dropped 1.3 percent to $1,334.10 an ounce at 10:30 a.m. on the Comex in New York. A close at that price would mark the biggest drop for a most-active contract since Jan. 30. On March 3, the metal reached $1,355, the highest since Oct. 30, as tensions between Ukraine and Russia escalated.

Political Standoff

Ukraine said it won’t compromise on the future of Crimea as lawmakers in Moscow pledged to accept the results of a vote on the Black Sea region joining Russia.

The standoff can be resolved diplomatically through talks between Russia and Ukraine’s government, U.S. President Barack Obama told Russia’s Vladimir Putin, the White House said.

Yesterday, holdings in exchange-traded products backed by gold rose 6.9 metric tons, the most in three weeks, to 1,752.2 tons, data compiled by Bloomberg show. Last month, assets fell to the lowest since October 2009 as the Fed reduced debt purchases.

Gold surged 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system and lowered interest rates to a record low to boost growth.

U.S. jobs data “is weighing on gold,” said Tommy Capalbo, a broker at Newedge Group in New York. “Today’s numbers make it clear that tapering will continue.”

Analysts are divided on the outlook for gold, down 31 percent from a record $1,923.70 on Sept. 6, 2011.

The price will slump toward $1,100 by the end of the year as the U.S. recovery picks up momentum and the dollar gains, according to Michael Lewis, the head of commodity research at Frankfurt-based Deutsche Bank AG.

Increasing demand from buyers of coins, jewelry and bars will help to sustain the rally this year, according toJames Steel, chief precious metals analyst at HSBC Securities Inc. in New York.