FRANKFURT (MarketWatch) -- Gold futures fell sharply on Friday, breaking below the $1,200-level, as the U.S. dollar surged against its rivals buoyed by data showing that unexpectedly few jobs were lost in November.
Gold for December delivery fell to an intraday low of $1,186 an ounce in electronic trading on Globex.
The contract was last down $31.20, or 2.6%, to $1,186.20 an ounce.
Gold and the dollar have a very strong inverse correlation -- when the dollar gains, gold prices tend to fall.
"The pullback is related top the dollar reaction to the jobs data," said James Steel, gold analyst at HSBC in New York.
"The dollar/euro has fallen back below $1.50 which is a rather important level," Steel said. "It has reduced the near-term currency hedge buying in the gold market."
The greenback surged against its rivals after the Labor Department reported that the U.S. labor market improved markedly in November, with the unemployment rate falling back to 10% and job losses shrinking to the lowest level in nearly two years.
Nonfarm payrolls dropped by a seasonally adjusted 11,000 in November, the fewest since December 2007.
The report was much better than expected by economists surveyed by MarketWatch, who were looking for 100,000 fewer jobs and a steady 10.2% unemployment rate.
Payroll losses in September and October were revised lower by a total of 159,000.
The dollar index (DXY 74.91, +0.28, +0.37%) , which measures the performance of the dollar against a trade-weighted basket of six major currencies, rose 1% to 75.340 in recent trading.
It stood at 74.660 before the data and at 74.619 in late North American trading Thursday. Read more on the dollar.
The euro fell 0.8% to $1.4926, breaking below the key $1.50 level.
The dollar rose 1.6% against the Japanese yen to 89.77 yen.
On Globex, other metals prices also fell sharply. December silver futures fell 2.8% to $18.56 an ounce, and January platinum futures dropped 1% to $1,478 an ounce.
Even before the jobs data, gold prices were trading lower, as traders locked in some of their recent gains after the precious metal's recent record-breaking streak.
Gold's decline comes "at a time when gold was looking a little bit overdone to the upside," Steel said. "It has occurred when the market was thinking of taking profits anyway."
On Thursday, gold futures rose to a record high of $1,226.40 an ounce, extending their recent record-breaking streak.
Investment demand for gold and other commodities has surged in recent weeks. Commodity-sector funds, tracked by EPFR Global, posted inflows of over $1 billion for the third straight week in early December.
During the week ended Dec. 2, this fund group absorbed $1.13 billion, taking year-to-date inflows to over $24 billion, EPFR Global said.
