Gold Plunges To Settle Below $1240 After Upbeat U.S. Jobs Data

(RTTNews) - Gold futures ended sharply lower on Friday, after some better-than-expected U.S. jobs report lifted the dollar higher and seem to be paving the way for a U.S. interest rate hike by mid-year.

Employment in the U.S. increased by more than anticipated in January, a report from the Labor Department showed Friday. The report also showed an unexpected uptick in the unemployment rate that edged up to 5.7 percent in January from 5.6 percent in December.

The Fed has been hinting that interest rates will rise in June despite stubborn low inflation. Today's jobs report could mean that an April rate hike is instead in the cards if consumer prices pick up. Full-time employment surged, and jobs gains from the previous two months were revised higher.

Charles Plosser the president of the Philadelphia Fed, on Friday told CNBC that policy makers need to regard low inflation as "temporary" due to the collapse in oil prices. He said it would be hard to justify not raising interest rates in light of improvements to the economy.

Gold for April delivery, the most actively traded contract, dived $28.10 or 2.2 percent to settle at $1,234.60 an ounce on the Comex division of the New York Mercantile Exchange on Friday.

Gold for April delivery scaled an intraday high of $1,269.00 and a low of $1,228.20 an ounce.

On Thursday, gold ended at $1,262.70 an ounce, down $1.80 or 0.1 percent, after some mixed economic data from the U.S. with initial claims for unemployment benefits rising less than expected and trade deficit rising more than anticipated in December.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to 773.31 tons on Friday from its previous close of 767.93 tons on Thursday.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 94.72 on Friday, up from its previous close of 93.59 late Thursday in North American trade. The dollar scaled a high of 94.75 intraday and a low of 93.52.

The euro trended lower against the dollar at $1.1320 on Friday, as compared to its previous close of $1.1477 late Thursday in North American trade. The euro scaled a high of $1.1487 intraday and a low of $1.1313.

In economic news from the U.S., employment in the U.S. increased more than anticipated in January, with the Labor Department indicating non-farm payroll employment to have risen by 257,000 jobs in January compared to economist estimates for an increase about 230,000 jobs. Nonetheless, the report also showed that the unemployment rate edged up to 5.7 percent in January from 5.6 percent in December.

The unemployment rate had been expected to remain unchanged from the previous month, when it was at its lowest level since a matching rate in June of 2008. Revised data also showed that employment in November and December jumped by 423,000 jobs and 329,000 jobs, respectively, reflecting a net upward revision of 147,000.

From the eurozone, Germany's industrial production expanded for the fourth consecutive month in December, but the growth rate weakened, defying expectations for a faster expansion, as mild weather dampened construction activity. German industrial output edged up 0.1 percent in December from a month ago, Destatis said Friday. Production was forecast to rise 0.4 percent after expanding by a revised 0.1 percent in November.

The French trade deficit increased more than expected in December due to an increase in imports, the customs office reported Friday. The trade gap widened to EUR 3.44 billion in December from EUR 3.09 billion in November. The deficit was forecast to rise to EUR 3.3 billion.

The U.K. trade deficit widened to the highest in four years in 2014 as exports declined sharply than imports, official data revealed Friday. The visible trade gap rose to GBP 10.2 billion in December from GBP 9.28 billion in November. Economists expected a GBP 9.1 billion deficit.

Standard & Poor's downgraded the long-term rating of Greece to B-minus from B, while placing the beleaguered country on CreditWatch negative. This means Greece could once again be downgraded in the near future.