Precious metals tumbled on Friday, with gold sliding the most in one day since Oct. 17, as surprisingly strong U.S. employment data lifted the dollar.
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Oil rose as traders covered short positions ahead of the weekend, U.S. soybean futures rose to a two-week high and corn futures rose for the first time sine Oct. 29, bolstered by government crop data. Orange juice futures posted the biggest gains on the Thomson Reuters Core Commodities index, which settled up 0.45 percent, with gains in 13 of the 19 commodities it tracks.
The U.S. Labor Department reported that employers added 204,000 jobs last month, leading many investors to expect that the Federal Reserve may soon temper its bond-buying stimulus. The unexpected acceleration in job growth indicated the U.S. government shutdown had less of an impact than feared.
"Those payroll numbers made the folks who buy gold nervous as they did not go in the direction they wanted to see, suggesting that tapering could be back on the table," said Axel Merk, chief investment officer at California-based Merk Funds, which have $450 million assets under management.
The dollar rallied, on track for its second straight weekly gain against the euro. U.S. stocks bounced back from Thursday's selloff, putting the Dow Jones industrial average and S&P 500 stock index on track to close their fifth straight week of gains.
U.S. crude prices seesawed and finished 40 cents higher, as traders digested the jobs data. Brent recovered from a four-month low as traders monitored negotiations between Western powers and Iran.
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Soybeans soared to two-week highs as a U.S. Agriculture Department (USDA) outlook revealed a smaller world carryover than expected.
Orange juice led the index's gains, as a USDA data revealed a near 5 percent yearly reduction in the country's 2013/2014 crop to 183,264.
GOLD SINKS AS DOLLAR RALLIES
Gold dropped 1.7 percent. A flurry of sell orders in heavy volume sent U.S. gold futures down more than $10 just minutes after the October nonfarm payroll data, setting a weaker tone for the rest of the day. A similar move in gold futures was also seen after Thursday's strong GDP report.
"At the moment, the market is looking at underlying growth and can see how the U.S. is accelerating and that very simply leads to tapering one way or another, which is obviously not bullish for gold," BofA Merrill Lynch analyst Michael Widmer said.
The precious metal had rebounded in recent weeks after a prolonged budget battle in Washington in October led investors to believe the Fed may not start withdrawing support for the economy and might push the tapering into next year.
But after Friday's strong employment data, some economists said it would be unwise to rule out chances the Fed could curtail its bond-buying as soon as its next meeting in December.
JOBS DATA LIFTS OIL
Brent oil rose more than $1 per barrel on Friday as traders monitored a meeting between Western powers and Iran over its nuclear program and covered short bets into the weekend.
U.S. oil prices bounced higher and lower, with some traders worrying that oil demand could take a hit if the U.S. Federal Reserve pulls back on quantitative easing. But oil received support from civil unrest in Libya, where some of the worst fighting in months broke out in Tripoli on Thursday.
Libyan protesters prevented a tanker from loading oil at the eastern Hariga port on Friday.
SOYBEANS SOAR AFTER USDA REPORT
U.S. soybean futures rose to a two-week high after the U.S. Department of Agriculture predicted that stronger global demand would soak up more of the bumper crop than had been expected this year, traders said.
Corn futures posted their daily gain since Oct. 29, after the USDA outlook for a record corn crop missed expectations. Wheat closed lower, pressured by large supplies.
Soybeans notched the biggest move, with the front-month contract rising 2.1 percent, the biggest percentage rise since Sept. 13. A rally in soymeal added strength to soybeans.
The U.S. soybean crop was pegged at 3.258 billion bushels, the third largest on record, with an average yield of 43.0 bushels per acre. Global ending stocks of soybeans were estimated at 70.23 million tonnes, more than 2 million tonnes below the average of trade forecasts.
For the week, soybeans were up 3.1 percent. Corn fell 0.2 percent for the week and wheat dropped 3 percent. Despite strong demand, traders expected big crops to keep pressure on prices.
The USDA report was "a little like expecting a red wagon for Christmas and getting socks and underwear," said Chris Manns, president, of Traders Group Inc. (Reporting By Marina Lopes; Editing by David Gregorio)