Gold slips as firmer dollar offsets bets on Fed pause

REUTERS – Gold prices slipped on Monday as the dollar firmed after a strong US payrolls report, overshadowing support from prospects that the Federal Reserve would pause its rate hikes this month.

Spot gold was down 0.4% at USD 1,939.19 per ounce, as of 0803 GMT, hovering near its lowest levels since May 30. US gold futures shed 0.8% to USD 1,954.40.

Gold prices dropped more than 1% on Friday after data showed US nonfarm payrolls rose by 339,000 jobs last month, exceeding a 190,000 forecast by economists polled by Reuters. But the unemployment rate surged to a seven-month high of 3.7% from a 53-year low of 3.4% in April.

The higher unemployment reading prompted markets to price in a 79.3% chance of the Fed leaving interest rates unchanged at its June 13-14 meeting, according to the CME FedWatch Tool.

“Money markets continue to favour a pause (as did comments from Fed vice chair nominee Philip Jefferson), so it may limit the downside for gold even if it has lost some safe-haven flows from debt-ceiling concerns… The question now is whether (gold) will break support at USD 1,934 to bring USD 1,900 into focus,” City Index senior market analyst Matt Simpson said.

Non-interest-bearing bullion tends to become less attractive in a high-interest rate environment.

The U.S. House of Representatives last week passed a bill to suspend the USD 31.4 trillion debt ceiling and averted a first-ever default.

The dollar index rose 0.2%, making greenback-priced bullion less affordable for overseas buyers.

Most Asian stock markets extended a global rally on Monday, while oil prices jumped after Saudi Arabia pledged big output cuts.

According to Reuters technical analyst Wang Tao, gold might revisit its May 30 low of USD 1,931.76.

Spot silver lost 0.8% at USD 23.40 per ounce, platinum edged up 0.1% to USD 1,004.66 per ounce and palladium gained 1% to USD 1,434.61.

(Reporting by Kavya Guduru in Bengaluru; Editing by Sherry Jacob-Phillips, Rashmi Aich and Sohini Goswami)