The economy just got some great news, and gold hates it.
The U.S. economy added 195,000 jobs in June, easily besting the 165,000 consensus estimate. As soon as it heard the news, gold tanked $26, dropping to the lowest level in a week. But why?
"Gold hates any good U.S. data at this stage," said Kathy Lien of BK Asset Management, "because any kind of good news is driving the dollar sharply higher, and gold is just being punished as a result."
(Read More: Job Growth Posts Large Gain in June; Rate Holds)
For Lien, the Federal Reserve's tapering plans remain the market's main focus. And she believes that today's number "overall reinforces the idea that the data is good enough to taper in September."
(Read More: Why Fed May Hike Sooner Than You Think)
That is certainly what the bond market seems to imply. Yields are rising as traders expect that the Fed is now getting the economic signals it needs to exit the bond market shortly. And as yields rise, gold looks like a worse and worse investment, because its zero percent yield looks increasingly meager when compared to the yield of Treasury notes.
(Read More: Why Higher US Yields Should Cheer Investors)
As George Gero, gold analyst at RBC, wrote in a note: "Bond yields jumped higher," which makes for "strong dollar and weak metals."