US resurgence takes shine off yellow metal

Gold prices have swung into defensive mode on fresh signs of resurgence in the US economy, wilting the metal's safe haven appeal. Traders foresee further downside potential as stronger-than-expected economic data argue for an earlier rise in US interest rates.

One major indication of gold's increased sensitivity to US statistics was the metal's slump on Friday to $1,163 per ounce, its lowest price in three months, after the labor department released data showing non-farm payrolls grew more than expected in February. Other recent data on US private employment and durable goods orders has also hurt gold. In the coming weeks, data on housing, jobless claims and gross domestic product will be closely watched for clues on the strength of the economy.

While the possibility of a US rate hike has clouded the gold market for more than a year, analysts said the metal's drop on Friday, the steepest decline linked to US non-farm payrolls data since May 2009, was notable. "While a rising rates environment bodes ill for gold, its sensitivity to Friday's data highlights that, the gold market at least, has not fully priced in a rate hike," Barclays analysts said in a note.