Gold Prices Drop After U.S. Created 304K Jobs In January
(Kitco News) - The gold market is seeing some selling pressure Friday after the U.S. labor market showed strong growth in January, according to the latest government employment data.
Friday, the U.S. Labor Department said 304,000 jobs were created in January, missing expectations; according to consensus forecasts economists were expecting to see job gains of around 165,000. However some of some of the enthusiasm in the labor market has been tempered after significant revision to December’s employment numbers. December’s data was revised down to 222,000 jobs. According to reports this is the biggest revision to the employment numbers since 2014.
“After revisions, job gains have averaged 241,000 per month over the last 3 months,” the report said.
At the same time the unemployment rate came in at 4.0%, a tick up from December's reading of 3.9%.
Gold prices were relatively unchanged on the day ahead of the report and has lost some ground in initial reaction to the data. April gold futures last traded at $1,323.80 an ounce, down 0.11% on the day.
Although employment continues to expand, wage growth remains tepid. The report said that average hourly earnings increased 0.1% last month or by 3 cents, missing expectations. Economists were expecting to see wages increase 0.3%. For the last 12 months wages increased 3.2%.
The wage growth is mixed for gold, according to some commodity analysts. Although muted inflation pressures will keep the Federal Reserve from raising interest rates, it does not prompt investors to buy gold as an inflation hedge.
Andrew Grantham, senior economist at CIBC World Markets said although the Federal Reserve is in wait-and-see mode, the latest employment data support a further increase in interest rates later this year.
“While it makes sense for the Fed to wait and see how its 2018 rate hikes impact the economy in the first half of this year, strong job creation and wage growth suggests consumer spending should still be robust and that policymakers should be able to hike rates once more this year,” he said.
Grantham added that the latest employment data should continue to support the U.S. dollar and weaken bond prices, which would drive bond yields higher; both factors are negative for the gold market.