Gold Prices Skip "Heavier Selling" After Best US Jobs Data in 4.5 Years, London Lease Rate Falls Back as "Bears" Quit Short Bets

GOLD PRICES slipped Friday afternoon in London, ending the week with a 1.0% gain after stronger-than-expected US jobs data.

The US economy added 321,000 net jobs in November, the Bureau of Labor Statistics said – the strongest growth since May 2010, and the 50th consecutive month of net growth.

New York's stock markets ticked higher, but crude oil sank 1.5% towards this week's new 5-year lows as the Dollar rose sharply with longer-term US bond yields.

"Today's number brings expectations of an interest-rate increase," Bloomberg quotes one FX market strategist.

"Maybe we're at the point where the stock market thinks the economy can grow without the Fed pumping money into it."

"Given the [strong] non-farm payroll figures and lack of physical buying interest," says the daily commodities note from South Africa's Standard Bank, "gold prices should have come under heavier selling pressure.

"However the metal has held relatively well considering with prices bouncing strongly from its intraday lows."

Dropping on the US jobs data to $1190 per ounce, gold prices first rallied back to $1200 before easing to record a London PM Fix – the global benchmark for physical metal – of $1194.

That was the lowest London Fix since Monday morning's surge from new 5-year lows in Asian spot trade following Sunday's "No" result in Switzerland's referendum on expanding central bank gold reserves.

"This week," says French investment and bullion bank Natixis, looking at wholesale gold borrowing costs, "one-month gold lease rates hit 0.73%, the highest level since the beginning of the financial crisis."

But that jump in gold borrowing costs has swiftly receded, the bank notes, because "The sharp rally in gold prices on Monday resulted in a closure of short positions which in turn meant [bearish traders] no longer needed to borrow gold."

London's Gold Offered Forward rate – an average of the incentive offered by would-be lenders to would-be borrowers of gold for cash swaps, known as GOFO – today rose back above zero for the first time in 6 weeks.

That would suggest, says Natixis' note, either "new lenders, fewer borrowers, a release of supply that was previously not available for lending," or some combination.

Wholesale trade body the London Bullion Market Association this week confirmed the GOFO rate will be discontinued from the end of January 2015, advising market participants how to start unwinding trades referencing this rate, which bullion banks are unwilling to provide as a formal and thus regulated 'benchmark'.

Meantime in China – the world's No.1 miner, importer and consumer nation for gold so far in 2014 – volume in Shanghai's new international gold contract, dealt for metal stored in the city's free trade zone, this week rose to average more than 8% of the main domestic gold contract's daily turnover by value.

Launched in September, the iAu9999 contract had previously averaged barely 3% of the main Au(T+D) contract's turnover.