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Gold Prices Volatile Another Surge In U.S. Employment, Unemployment At 50-Year Low

Kitco News

Editor's Note: The article was updated to reflect a volatile gold price environment.

(Kitco News) - After a brief dip into negative territory gold prices are back in the green as wage growth remains muted following the U.S. strong growth in the U.S. labor market last month.

Friday, The Bureau of Labor Statistics said 263,000 jobs were created in April. According to consensus estimates, economists were expecting to see job gains of 181,000.

At the same time, the unemployment rate dropped lower to 3.6%; economists were expecting an unchanged reading at 3.8%. The unemployment rate is at its lowest level since 1969.

Gold prices were relatively unchanged on the day ahead of the report and slipped modestly lower in initial reaction. June gold futures last traded at $1,275.20 an ounce, up 0.26% on the day.

"Gold's resilience in the face of the strong jobs report suggests recent selling pressure has at least temporarily exhausted the bears, and the yellow metal is due for at least a respite from downside pressure," said Jim Wyckoff, senior technical analyst at Kitco.com

Although the headline data was stronger than expected, there is not a lot of good news in wages. The report said that the average hourly earnings rose by six cents or 0.2% last month to $27.77. Economists were expecting to see a monthly increase of 0.3%. For the year wages increased by 3.2%.

Some analysts have noted that weak wage inflation will be positive for gold prices because could prompt the Federal Reserve to cut interest rates in a low inflation environment. Earlier this week, Federal Reserve Chairman Jerome Powell said that the central bank sees weak inflation pressures as transitory and remain optimistic that inflation will eventually rise to 2%.

Andrew Grantham, senior economist at CIBC Capital Markets, said that although employment growth is roaring ahead, the report showed a mixed message with the disappointing wage growth.

“The mixed messages mean that reaction to the report will likely be limited.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.