Gold tumbles as US economy shows more signs of strength

Gold mining stocks have been whacked after the precious metal fell below $US1200 for the first time this year.

Strong US jobs data on Friday fuelled expectations that the US Federal Reserve will start hiking interest rates soon, sparking a 2 per cent slump in the gold price that took it to a four-year low.

The precious metal on Monday extended the fall, slipping another 0.25 per cent to $US1188 an ounce in late afternoon Asian trade, extending its losses since its year peak in March to 13.9 per cent.

The stocks of Australian gold miners were punished hard in local trade on Monday. Australia's biggest gold miner, Newcrest, slid 3.4 per cent after falling as far as $9.88, its lowest since June. 

Smaller gold miners have been hit even harder, with Resolute Mining slumping 11.2 per cent, Northern Star Resources down 11.4 per cent. Beadell Rescoures was off 12.5 per cent, Medusa Mining dropped 9.4 per cent and Regis Resources eased 5.3 per cent.

The tumble comes as the US dollar surged against a basket of currencies after the US Labor Department said hiring accelerated in September, with the unemployment rate sinking to a six-year low.

The Australian dollar fell 1 per cent against the greenback to a four-year low.

The US dollar's strength weakened the gold price and other precious metals, with silver slumping 1.1 per cent to $US16.80 – a four-year low.

"The US economy continues to charge forward, with unemployment breaking below 6 per cent  for the first time since July 2008. However, the pessimists will note that wage inflation remains stagnant," ANZ head of markets research David Croy said.

Average hourly earnings rose just 2 percent from a year earlier, well below above 3 per cent before the recession in 2008-09.

"The Fed has all but achieved its objective on the labour market," Mr Croy said.

"Wages growth remains disappointing and that will play into Fed chair Yellen's dovish hands, but the pendulum in favour of normalisation is swinging towards action, rather than continued inertia."

Expectations of a US rate hike has dented gold's safe haven appeal, despite uneven growth in Asia and Europe.

The gold price is now close to the ANZ's end-of-year target of $US1180 an ounce.

The bank then expects the metal to pick up steadily in 2015, setting quarterly price targets $US1220 for March, $US1260 for June, $US1280 for September, and $US1320 in December.

The recent falls in the gold price has also sparked interest in bullion from the world's wealthy.

Last week the Perth Mint – Australia's only gold refinery and the world's second biggest producer after China – revealed sales of gold coins and minted bars rose to 68,781 ounces in September, their highest since October last year.

It followed the US Mint saying that sales of gold coins more than doubled last month to 58,000 ounces, the highest since January.

Minted bars range from 1 to 100 grams and along with coins are popular among investors who want immediate liquity.

Perth Mint's analysis and strategy manager Bron Suchecki said demand for larger bars – 1 kilogram or more – needed to regain momentum before the world gold price started to appreciate.

Mr Sucheki said he was seeing promising signs with Asian buyers, who account for about 80 per cent of Perth Mint's sales by volume, returning to the market.

Read more: http://www.smh.com.au/business/markets/gold-tumbles-as-us-economy-shows-more-signs-of-strength-20141006-10qseo.html#ixzz3FMU1xwfF