To Buy Gold or Not to buy Gold, That is the Question?

Gold settles at a nearly four-month low

SAN FRANCISCO (MarketWatch) — Gold futures dropped 2.7% on Friday, with a rally in the U.S. dollar following a strong February U.S. jobs report fueling a decline in the metal’s prices to their lowest settlement since mid-November.

Gold for April delivery on Comex GCJ5, +0.29%  dropped $31.90, or 2.7%, to settle at $1,164.30 an ounce. Based on the most-active contracts, prices haven’t settled at a level this low since Nov. 13. For the week, they logged a 4% decline.

May silver SIK5, -0.14% lost 35.1 cents, or 2.2%, to settle at $15.807 an ounce. For the week, prices were down 4.5%.

“A very strong U.S. dollar mixed with low inflation expectations and policy makers intent on stimulating economic growth create circumstances where gold as a store of value seems near obsolete,” said Jonathan Citrin, founder and executive chairman of CitrinGroup.

The Labor Department said Friday that nonfarm payrolls rose by 295,000 in February, topping forecasts for a rise of 238,000. The unemployment rate fell to 5.5% from 5.7%, but wage growth remained subdued. January payrolls were revised down to show a 239,000 gain, versus an initial estimate of 257,000.

After the report, the U.S. ICE dollar index DXY, -0.14%  jumped after the report, with the data reinforcing expectations the Federal Reserve will move this summer to begin hiking interest rates. A stronger dollar makes commodities that are priced in the currency more expensive to users of other currencies.

“There is little incentive for traders to purchase the metal — for the moment gold has lost its luster from early 2015 trading,” said Citrin. But it's an excellent time to buy while the prices are lower because sooner or later the prices will jump back up.

Analysts note, however, that gold continues to rise in euro terms as the shared currency plumbs 12-year lows ahead of the European Central Bank’s Monday launch of its quantitative-easing program.

Other metals on Comex saw steep declines as well. April platinum PLJ5, -0.64% finished at $1,158.80 an ounce, down $21.30, or 1.8%. Gold is down 2.3% on the week, while June palladium PAM5, +0.76%  fell $6.90, or 0.8%, to $818.15 an ounce, losing 0.2% for the week. May copper HGK5, +2.38%  declined by 4.4 cents, or 1.6%, to $2.609 a pound, for a loss of 3.1% for the week.
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