LONDON (Reuters) - Gold fell on Friday as investors sold assets after data showed a much larger-than-expected fall in U.S. November non-farm payrolls.
A sharp dip in the dollar in the immediate wake of the numbers initially sent gold higher, but it quickly gave up gains as the U.S. currency reversed direction.
The precious metal is often bought as an alternative investment to the dollar and tends to move in the opposite direction to it.
Spot gold was quoted at $752.30/754.30 an ounce at 2:27 p.m., against $765.70 late in New York on Thursday, having earlier touched a low of $747.20.
"(The data) shows a worsening economic situation, and it is hard for assets to maintain value against that," said John Meyer, an analyst at Fairfax investment bank.
U.S. non-farm payrolls fell by 533,000 in November, sending the unemployment rate to 6.7 percent, the highest since 1993. Analysts had predicted payrolls would fall by 340,000.
The other main external driver of gold, crude oil, also weighed on the precious metal, as prices dropped nearly 2 percent to below $43 an ounce.
Sharp falls in the crude price this week have sent oil down to a near four-year low. Weaker oil prices can undermine interest in commodities as an asset class, analysts say.
DEFLATION EYED
Interest in gold is being limited by expectations inflation will fall after sharp drops in the price of many raw materials such as crude oil and industrial metals.
Oil prices have shed more than $100 a barrel since they hit an all-time high of $147.27 an barrel in July, while prices of copper, aluminium and tin have also declined sharply.
"Mounting fears over the impact that a potential period of deflation may have on prices, appear to be weighing on sentiment," said Standard Bank analyst Leon Westgate in a note.
Among other precious metals, silver fell along with gold, and was quoted at $9.22/9.30 an ounce against $9.46 late in New York on Thursday.
Platinum and palladium edged lower but remained rangebound as they consolidated after sharp price falls earlier in the week. Both metals have come under pressure from a spate of bad news from the global auto market.
China posted its third monthly fall in car sales this year in November, official data showed on Friday, setting the stage for a possible double-digit decline in 2009 despite government efforts to pump up consumer confidence.
General Motors said it is eliminating a third production shift at three U.S. plants, leading to almost 2,000 job losses, and will slow production of a range of cars.
Meanwhile BMW said its global sales fell by a quarter in November.
Spot platinum was quoted at $784/804 an ounce, down from $786.50 an ounce late on Thursday. Spot palladium was at $164.50/172.50 an ounce against $166.50.
