Gold futures ended lower on Friday, down more than 1% for the week, after a stronger-than-expected U.S. jobs report drove up the dollar and Treasury yields as the data laid some groundwork for a potentially more aggressive Federal Reserve interest-rate response this year.
April gold GCJ8, +0.19% shed $10.60, or 0.8%, to settle at $1,337.30 an ounce, building a total loss of roughly 1.5% for the week, according to FactSet data, and trimming its year-to-date gain to 1.8%. Prices, however, finished off the session's worst levels.
March silver SIH8, +0.14% dropped 44.6 cents, or 2.6%, to $16.709 an ounce. It logged a 4.2% weekly decline. The exchange-traded SPDR Gold Shares GLD, +0.25% fell 1.1%, set for a weekly loss of the same amount, while the silver-focused iShares Silver Trust SLV, +0.51% declined 2.7%, trading down 3.6% for the week.
"After holding it's own through the week and reacting to a very consistent FOMC statement earlier in the week, [Friday's] jobs report, signs of wage inflation and resurgence of the U.S. dollar has taken gold lower...with a negative bias heading into the weekend," said Jeff Wright, chief investment officer at Wolfpack Capital.
Data Friday showed that the U.S. created 200,000 new jobs in the first month of 2018, beating the median forecast in a survey of economists. Unemployment remained at a 17-year low of 4.1%.
"The report falls into the camp of the U.S. monetary policy hawks, who want to see U.S. interest rates rise at a faster pace," said Jim Wyckoff, senior analyst at Kitco.
As for the inflation watch, average hourly wages jumped 9 cents, or 0.3%, to $26.74. That pushed the yearly increase to 2.9% from 2.6%, marking the highest level since the end of the 2007-09 recession in June 2009. Analysts have stressed that while inflation risk drives up bond yields, it also restores investor faith in gold as a hedge.
Plus: A new report says the unemployment rate may have a lot more room to fall
Federal-fund futures are currently pricing in Wall Street expectations for a nearly 80% probability for a quarter-percentage point rate increase to a key interest rate during the March 20-21 Fed meeting, according to CME Group data.
Read: Fed takes step toward rate increase as baton set to pass to Powell
Read: Goldman touts best commodity investing environment in a decade
In response to the report, the ICE U.S. Dollar Index DXY, -0.04% was up 0.4% to 89.061, after hitting three-year lows earlier this week. Dollar-priced gold often moves inversely to the buck.
"The direction of U.S. dollar, along with debate over three versus four interest-rate hikes in 2018 will be the key drivers in gold's daily/weekly price for the foreseeable future," Wright said.
The yield on the 10-year Treasury note TMUBMUSD10Y, +0.52% shot up to a four-year high at 2.839%. Rising Fed rates, and subsequently, rising yields, can also be seen as a negative for gold, in part because the commodity offers no yield and because rising yields can contribute to a stronger dollar.
U.S. stocks declined after the jobs report, with traders reacting to the surge in Treasury yields, spooked by the prospect of higher interest rates on company growth. Stocks often move inversely to gold but have so far defied that relationship in Friday trading.
Looking ahead, Wright said he'll be watching the potential for another budgetary showdown in Washington as the continuing resolution expires on Thursday.
"I think gold has very strong support at $1,325 but is also range bound since it did not break out above $1,350," he said.
In other metals action, March copper HGH8, -1.09% fell 0.7% to $3.188 a pound, for a weekly decline of 0.4%. April platinum PLJ8, -0.15% finished down 0.8% to $999.40 an ounce, contributing to a loss of 1.9% on the week.
Palladium's March contract PAH8, -1.78% rose 2% to $1,044.95 an ounce, but still settled down about 3.7% from last week's settlement.
Read: How lithium and cobalt are getting a boost from Tesla, Apple batteries