Gold dropped in choppy trading on Friday, January 5, as the dollar rose in the wake of U.S. non-farm payrolls data for December, prompting traders to cash in gains from the metal’s rally to 3-1/2 month highs this week.
Spot gold was down 0.5 percent at $1,316.03 an ounceby 1425 GMT, off Thursday’s high of $1,325.86. U.S. gold futures for February delivery were down $4.40 at $1,317.20.
The metal remains on track for a fourth straight weekly gain, however, for the first time since April. It has risen nearly 1 percent in the first trading week of the year, having climbed by 13 percent in 2017.
That has left gold looking overstretched, ABN Amro analyst Georgette Boele said. “I think when the rest of the market returns, gold prices will be lower and the U.S. dollar will
recover.”
Traders overall stuck to their conviction that the Federal Reserve will raise rates twice this year, a Reuters analysis of fed funds futures contracts traded at CME Group suggested.
Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Elsewhere physical gold demand across Asia remained subdued this week as prices rallied, keeping retail buyers away from the market. In top consumer China, premiums declined to $6-$7 an ounce from around $10 last week.
Among other precious metals, palladium was down 0.5 percent at $1,090.45, also retreating after hitting a record high of $1,105.70 on Thursday.
It was the best performer among major precious metals last year, rising 56 percent on fears that rising demand for the autocatalyst metal would further tighten the market after years
of deficit.
Spot silver was down 0.4 percent at $17.16 after touching its highest point in more than six weeks at $17.27 in the previous session.
Spot platinum was 0.1 percent higher at $960.74 an ounce. It hit a 3-1/2 month peak at $965.40 on Thursday.
