Gold extended losses for a third session on Monday as a robust US nonfarm payrolls report boosted the dollar to its highest in over five years, dulling the bullion’s appeal as a hedge.

Spot gold eased 0.2 per cent to $1,189.94 an ounce by 0020 GMT. The metal lost 1.1 per cent in the previous session after data showed US employers added the largest number of workers in nearly three years in November and wage gains picked up, in a sign of economic strength that could draw the Federal Reserve closer to raising interest rates.

Higher interest rates

Investors fear higher rates would decrease the demand for gold, a non-interest-bearing asset.

The jobs report boosted the dollar to its highest since March 2009, and the Dow and S&P 500 ended at record highs.

US bond prices dropped, pushing short-term yields to their biggest single-day rises in nearly four years as investors priced in a US interest rate hike by mid-2015.

Despite Friday’s losses, gold ended the week higher on short-covering and modest rebound in oil prices.

Hedge funds and money managers boosted their bullish position in US gold contracts to the highest since August in the holiday-shortened week to December 2, the Commodity Futures Trading Commission said on Friday.

SPDR Gold Trust

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.12 per cent to 720.91 tonnes on Friday.

The cost of lending gold returned to positive territory on Friday for the first time in over a month, capping a dramatic week-long recovery, as robust US jobless data reinforced expectations of higher interest rates next year.

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