NEW YORK, Dec 6: Gold fell sharply to close just above $750 an ounce on Friday as a bleak U.S. job report led to a higher dollar, triggering wholesale liquidation across the board from stocks to oil and commodities.

A US government report showed that employers axed payrolls by 533,000 jobs in November, the most in 34 years and far more than expected, and the unemployment rate rose to 6.7 per cent.

The financial market may be headed for another major downward leg. If that happens, gold may be dragged down with other financial assets, said Jeffrey Christian, managing director at commodities research firm CPM Group.

US stock markets turned more than 2 per cent higher in late trade after initially falling as much as 3 per cent on mounting recession worries.

When stocks enter one of those sharp declines, people liquidate their gold because they need cash,” Christian said.

Spot gold ended at $755.25 at 2:00 p.m. EST (1900 GMT), down 1.4 per cent from Thursday’s close of $765.70.

US gold futures for February delivery settled down $13.30, or 1.7 per cent, at $752.20 an ounce on the COMEX division of the New York Mercantile Exchange. Futures ended the week more than 8 per cent lower compared

with last Friday’s settlement of $819 an once.

The job 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.

The other main external driver of gold, crude oil, also weighed on the precious metal, as prices nearly sank below $40 per barrel.

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.

Gold has actually held up relatively well compared to other commodities or financial assets. It has fallen sharply but not nearly as sharply as other things, Christian said.

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.

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 at $9.43, which was 0.4 per cent lower than its Thursday close of $9.46.Platinum and palladium 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.

Spot platinum was at $778.50 an ounce, down 1pc from its previous finish of $786.50 an ounce late on Thursday.—Reuters