Gold prices have posted strong gains in Friday’s North American session, climbing 1 percent. Currently, spot gold is trading at $1274.13 an ounce. On the release front, US employment numbers were a major disappointment. Nonfarm Payrolls plunged to 138 thousand, well off the forecast of 181 thousand. Wage growth softened, as Average Hourly Earnings edged lower to 0.2%, matching the forecast. The unemployment rate continues to fall, and came in at 4.3%, beating the estimate of 4.4%.
US employment numbers often move gold prices, as the health of the labor market is an important gauge of the strength of the US economy. When this data is softer than expected, investors often become jittery and dump dollar-denominated assets in favor of safe-haven assets, such as gold. This was the case on Friday, as an unexpectedly soft Nonfarm Payrolls boosted gold above $1276 earlier on Friday, its highest level since late April. The markets had hoped that a sparkling ADP Nonfarm Payroll report would be repeated, but this was not to be, as Nonfarm Payrolls slid to 138 thousand in May, compared to 253 thousand a month earlier. Wage growth dropped from 0.3% to 0.2%, as wages and inflation remain stubbornly low. Low levels of inflation have become a head-scratcher for Fed policy makers, as inflation remains stubbornly low despite a red-hot labor market. As for additional rate hikes in the second half of 2017, the markets are much more skeptical, as the heady predictions that the Fed could raise rates up to four times this year have faded considerably. Currently, a September rate increase is priced in at just 27 percent. With the next rate decision just less than two weeks away, we could see more volatility from gold, as the metal moves inversely with interest rates. Gold investors and traders will be glued to any comments from Fed policy makers, and any clues from the Fed about its rate plans could trigger swings in gold prices.
