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Gold Plunges As U.S. Economy Creates 224K Jobs In June

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Gold Plunges As U.S. Economy Creates 224K Jobs In June

(Kitco News) - Gold prices dropped more than 1% on the day following stronger-than-expected U.S. employment data from June.

U.S. payrolls rose by 224,000 in June, according to the Bureau of Labor Statistics. The monthly figure beat market consensus projecting 160,000 new positions after a disappointing May figure, which was downwardly revised to 72,000.

The U.S. unemployment rate edged up to 3.7% from 3.6% in June with more people joining the labor market. Despite the increase, unemployment still remained near a 50-year low.

Meanwhile, wages, another key element in the report, were unchanged at 3.1%.

The biggest jobs gains were in professional and business services, health care, as well as transportation and warehousing.

Gold immediately sold off with the August Comex gold futures last trading at $1,398.20, down 1.60% on the day.

Prior to the release, gold prices were slightly lower on the day and trading around $1,414 level as markets remained focused on how the employment report might influence the Federal Reserve’s rate decision in July.

“Markets will be more sensitive to payrolls than the Fed,” said ABN AMRO senior economist Bill Diviney. “June nonfarm payrolls will … attract even more attention than usual, particularly given the May number was a very weak.”

CIBC Capital Markets said it viewed the “roaring” employment numbers as a sign that the Federal Reserve will not cut rates at all this July.

“Overall, this supports our call that the Fed may not cut rates as markets expect this month, and should boost the USD and see yields rise today,” CIBC Capital Markets economist Katherine Judge said in a note on Friday.

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