Gold lower on U.S. jobs report

Gold lower on U.S. jobs report

Gold lower on U.S. jobs report early Monday as the dollar strengthened following the release of a strong U.S. monthly jobs report on Friday. The bullion also slipped on expected profit-taking following last week’s 12-month high, however it is sticking close to the $2,000 mark.

The U.S. unemployment rate fell to 3.5% in March, despite expectations it would hold at the prior month’s 3.6%, as labor force participation increased. Data released by the Labor Department showed nonfarm payrolls grew 236,000 last month, in line with economists’ estimates, though the pace of hiring slowed. 

June gold futures rallied 2% last week to settle at $2,026.40 an ounce on Comex, though the front-month contract fell 0.5% Thursday, the last settlement day in an abbreviated week. Bullion gained 8.1% last month after decreasing 5.6% in February, its worst performance since June 2021. Gold increased 8.8% in the first quarter. The metal fell $2.40 in 2022. The June contract is currently down $19.6 (-0.97%) an ounce to $2006.80 and the DG spot price is $1992.80.

There was no Comex settlement Friday because most U.S. financial markets were closed to observe Good Friday. Monday became the first day the markets had to respond to Friday’s jobs report. While U.S. markets are open, many financial markets in Europe and elsewhere remain closed for Easter Monday, so trading volumes will likely be lighter than usual. 

The growth in the labor market raised the likelihood that the Federal Reserve will continue with a series of interest rate hikes to curb inflation. That would be seen as bearish for gold, which becomes a less attractive alternate investment when rates go up. The gains in the dollar also make gold more expensive for holders of other currencies, pressuring prices for the yellow metal. 

The Fed has raised rates by 25 basis points twice this year following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November. The federal funds rate is currently at 4.75% to 5.00%. 

About 68% of investors tracked by the CME FedWatch Tool are betting that the Fed will raise interest rates by 25 basis points at the central bank’s next policy meeting in May, while 32% anticipate the central bank will leave rates unchanged. A week ago, most were betting on the Fed holding rates steady. Fed policymakers have said they track both inflation and labor market statistics when determining monetary policy. 

Also bearish for gold is a pause in physical gold demand in some key Asian hubs last week, which Reuters reported occurred because of high domestic prices.

In economic news this week, data on U.S. wholesale inventories comes out Monday, and the International Monetary Fund’s world economic outlook will be released Tuesday. Most importantly, the next round of U.S. inflation data comes out Wednesday with the release of the consumer price index for March. The same day brings the minutes of the latest Fed policy meeting.

Silver May futures gained 3.9% last week to settle at $25.09 an ounce on Comex after the metal advanced 0.2% Thursday. Silver increased 15% in March after retreating 12% in February. It edged up 0.5% in the first quarter. It advanced 3% in 2022. The May contract is currently down $0.143 (-0.57%) an ounce to $24.950 and the DG spot price is $24.88.

Spot palladium slipped 0.4% last week to $1,487.00 an ounce, though it rallied 2.7% Thursday. Palladium rose 3.7% in March after plummeting 14% in February. It fell 17% last quarter. Palladium lost 5.7% in 2022. Currently, the DG spot price is down $33.90 an ounce to $1458.50.

Spot platinum gained 1.9% last week to $1,018.30 an ounce after rising 1.3% Thursday. Platinum increased 3.7% last month after retreating 5.9% in February. It dropped 6.6% in the first quarter. Platinum surged 10% in 2022. The DG spot price is currently down $13.40 an ounce to $1001.40.

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