The Azadi gold coin tumbled 2.24 percent on Saturday following gold's drop in the international markets on Friday, as US economic data beat expectations, changing the outlook on US interest rates.
Gold fell more than two percent on Friday as global stock markets and the dollar rose on stronger-than-expected US jobs data, raising expectations that the Federal Reserve will increase interest rates by midyear, Reuters reported.
US nonfarm payrolls increased by 257,000 last month, topping expectations for 234,000, with the unemployment rate ticking up to 5.7 percent due to more people entering the labor force.
Tehran caught up with Friday's developments in the international markets on Saturday, with the rial rising against all major currencies with the euro and the Canadian dollar retreating the most versus the rial.
"The US employment report was good and there has been quite a sharp adjustment in interest rates expectations, with 10-year Treasury yields up 10 basis points," ABN Amro analyst Georgette Boele said to Reuters.
"I expect lower precious metals prices for the next six months up to the moment the US really starts hiking interest rates."
Spot gold dropped to a three-week low of $1,228.25 an ounce earlier and was down 2.43 percent at $1,234.04 an ounce by 19:02 GMT on Friday, its biggest fall since Dec. 15, Bloomberg data shows. It has lost 3.8 percent so far this week, which would be its largest fall since the week ended Oct. 31.
US gold for April delivery fell 2.2 percent to settle at $1,234.60 an ounce.
Benchmark Azadi trailed gold breaking bellow the 10,000,000 rials mark, for the first time since Jan. 15. The precious bullion coin sank 2.24 percent to 9,840,000 rials by 11:04 GMT on Saturday, its lowest since Jan, 12. The Azadi is headed for its worst monthly decline in the past year.
"If nothing else changes, earlier hikes in interest rates by the US central bank would be likely to undermine the prices of precious metals, notably gold and silver," Capital Economics said in a note.
"If Fed tightening is gradual and interest rates remain low by past standards, as we expect, there would be plenty of scope for other, more positive factors to dominate."
The dollar rose 1.2 percent against a basket of leading currencies, helped by a rise in the benchmark 10-year US Treasury yield to more than 1.9 percent. Wall Street rose and European equities hit a seven-year high.
"The negative pulls for gold are the elevated speculative positions, hawkish Fed and stronger dollar, while the lowering of the reserve requirements in China, negative yields in most European countries and uncertainty in Greece lend support," Saxo Bank senior manager Ole Hansen said to Reuters.
Elsewhere, holdings at SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose on Thursday to 24.86 million ounces, the highest since September.
China's gold consumption fell 24.7 percent to 886 metric tons last year even as output from the world's top consumer climbed 5.5 percent, the China Gold Association said.
Spot silver slid 3.7 percent to $16.62 an ounce. Platinum was down 2.6 percent at $1,218.50 an ounce and palladium dropped 1.7 percent to $779.00 an ounce.
Currencies Pull Back
The dollar also edged lower versus the rial augmenting Azadi's fall, while equities crawled up in Tehran.
The greenback slipped to a 2-month low of 34,240 rials by 11:04 GMT on Saturday, as it heads into its second consecutive month of declines due to increased hopes of a breakthrough deal being reached between Iran and the six world powers over Iran's nuclear energy program and the western sanctions besieging its economy.
The euro which fell 1.41 percent to 1.3116 against the dollar before Friday's close; fell 0.74 percent to 39,260 rials on Saturday in Tehran.
The British pound also retreated 0.48 percent to 52,420 rials on Saturday, tracking its retreat against the greenback on Friday. Sterling is at its lowest since Jan. 25, down 10 percent from the Dec. 28's 18-month high of 58,850 rials.
Sterling fell against the dollar on Friday after the US payrolls report, but was still on track for its biggest weekly gain against the greenback in a year.
The US report sent the dollar higher across the board, gaining over 1 percent against a basket of currencies. Against sterling, the dollar was up half a percent at $1.5248.
But the pound was still up more than 1 percent against the US currency for the week, boosted by economic data which drove investors to bring forward to early next year their expectations of when the Bank of England will start raising interest rates.
Jane Foley, a senior currency strategist at Rabobank in London, pointed out in an interview with Reuters that sterling has outperformed every major currency over the past 12 months apart from the Swiss franc and the dollar.
