Gold drops 1% as strong U.S. payrolls boost dollar and yields

Gold prices fell 1% on Friday after stronger-than-expected U.S. Payrolls data reinforced expectations that the Federal Reserve could keep interest rates higher for longer. Spot gold fell to $4,047.10 an ounce, while the U.S. Dollar rose 0.7% to its highest level since October 29, making dollar-denominated gold more expensive for holders of other currencies.

The U.S. Nonfarm payrolls increased more than expected in October and the unemployment rate fell to 4.1%, suggesting the labor market remained resilient. Traders currently see a 74.8% chance that the Fed will raise rates in December, compared with 72.8% before the payrolls report, according to CME's FedWatch tool.

Higher interest rates raise the opportunity cost of holding non-yielding bullion, making gold less attractive to investors. Despite the daily drop, spot gold was up 4.5% for the week, on track for its best week since late August, while lower prices encouraged Indian retail buying ahead of the Diwali festival.

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