Metals - Gold dips as strong US economic data benefits the dollar

LONDON (AFX) - Gold edged slightly lower after strong US payrolls data and a decline in the the January trade deficit boosted the dollar and lessened the metals appeal as an alternative asset to the US currency.
The Labor Department said the US economy added 97,000 jobs in February. Though analysts had initially expected a similar reading of 100,000, many had begun to revise down their forecasts ahead of the data release.
The dollar benefited from the payroll figure and also from data showing the trade deficit fell to 59.1 bln usd in January, down by 3.8 pct from a December deficit of 61.5 bln usd.
"The dollar has been strong all this morning and I think that has got the better of the gold market to be frank. I think the economic data was interpreted as dollar friendly," said HSBC analyst James Steel.
At 12.43 pm, spot gold was quoted at 651.40 usd an ounce. In mid-day trade, the metal was quoted at 653.30 usd an ounce.
Gold initially edged up after the payrolls data was released, as the metal has recently departed from its traditional inverse relationship with the dollar and has even been moving in step with economic indicators and equity markets.
Falls in equity markets and global economic uncertainty usually benefit gold.
Last week, however, the metal fell sharply amid a global equity markets rout that was sparked by a 9 pct plunge in the Chinese stock market - the largest one day decline in a decade.
Kitco analyst Jon Nadler said there are some signs market conditions could be returning to a more 'normal' environment, even though he remained cautious on the outlook for equities and the global economy.
"The correction (if that is what it will ultimately be labelled as) still looks like a warning bell of larger future events," he said.
He added for gold to continue its up trend, it will have to "call upon its old friends: oil, the dollar, and interest rates to find better correlations and get away from the slightly perverse focus on rising equity markets".