By Neils Christensen, Kitco News
The gold market is holding on to overnight gains as the U.S. labor market continues to show resilient strength
U.S. nonfarm payrolls rose by 206,000 last month, according to the Bureau of Labor Statistics. The monthly figure beat market consensus estimates of 191,000.
Meanwhile, the unemployment rate rose last month to 4.1%, up from 4.0% in May. Economists were expecting it to remain unchanged.
The gold market is seeing some solid bullish momentum in its initial reaction to the latest employment data. August gold futures last traded at $2,382, up more than 0.5% on the day.
Although the headline number was stronger than expected, significant downward revisions in April and May are taking some of the shine off June’s gains. The report said that April’s employment numbers were revised down to 108,000, from the previous estimate of 165,000. At the same time, May’s employment data was revised down to 218,000, compared to the initial estimate of 272,000.
“With these revisions, employment in April and May combined is 111,000 lower than previously reported,” the report said.
The report also showed that inflation pressures remain contained as wages grew in line with expectations. Average hourly wages increased by 10 cents or 0.3% last month to $35.00.
“Over the past 12 months, average hourly earnings have increased by 3.9%,” the report said.
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said that he expects markets will pay more attention to the rise in the unemployment rate than the headline number.
“Market players know that the Fed has been pushed further in the corner and economic data is throwing heavy punches at them to cut the rates sooner than later,” he said in a comment to Kitco News. “Another important thing to note today is that volume is very low in the market, but it is fair to say that gold traders have things on the right side as the shining metal is well on track to post another weekly gain.”
Michael Brown, Senior Research Strategist at Pepperstone, said he expects the latest employment data to have limited impact on the Federal Reserve’s monetary policy.
“On the whole, the policy implications of the today's data are likely to be relatively limited, particularly with the inflation side of the FOMC’s dual mandate continuing to take precedence. Obtaining greater ‘confidence’ in a return towards the 2% target remains the primary condition that must be met before a cut is delivered, though ‘unexpected’ labor market softness may elicit a policy response in advance of this. I continue to pencil in September for the first 25bp cut to be delivered,” he said in a note. “In any case, there remains a clear desire among FOMC members to deliver a cut, likely sooner rather than later, hence the ‘Fed put’ remains forceful, and flexible, in nature.
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