Gold Prices Push Into Positive Territory Following Disappointing Nonfarm Payrolls Data
(Kitco News) - The gold market has pushed higher following a drop in momentum in the labor market in the final month of 2017.
Friday, The Bureau of Labor Statistics said 148,000 jobs were created in December. Economists were expecting to see job gains of 190,000.
At the same time, the unemployment rate held steady at 4.1%, which was in line with expectations.
Not only was the headline data disappointing, but revisions were net negative. October employment data was revised down to 211,000 jobs from the previous level of 244,000, while November was revised up to 252,000 jobs from the previous level of 228,000.
Gold prices were seeing some profit taking ahead of the report, after prices hit their highest level since mid-September. But, February gold futures have managed to regain lost ground, last trading at $1,321.60 an ounce, flat on the day.
Also helping gold prices is continued stagnant growth in wages. The report said that average hourly wages increased by 9 cents to $26.63; however, for the year, wage growth increased 2.5%. Economist have noted that this rate of increase has been steady through most of the year.
Economists also pointed out that weak wage growth does not bode well for inflation and could force the Fed to the sidelines in 2018. Currently, the U.S. central bank is expecting to raise interest rates three times this year.
One surprise statistic many economists are focusing on is a collapse in retail trade employment. The report said that for the year retail trade has lost 67,000 jobs.
According to reports, gold is getting a lift from a weaker U.S. dollar and further flattening in the yield curve. The spread between 10-year and 2-year bond yields has fallen to 49 basis points, a multi-year low. A flatter yield curve raises concerns that the U.S. economy could fall into a recession, which is hurting the U.S. dollar, supporting gold prices.
Royce Mendes, senior economist at CIBC World Markets, shrugged off the disappointing employment data saying that the numbers shouldn’t alter expectations for continued economic growth.
“Overall, the report wasn't a game changer, but is slightly disappointing versus the consensus expectations. As a result, the numbers were positive for fixed income and negative for the US dollar,” he said.