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Gold price holds fast above $1,900 following employment U.S. nonfarm payrolls

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(Kitco News) - The gold market is holding firmly above the $1,900 level as the U.S. labor market continued to showed mixed improvement in September.

Friday, The Bureau of Labor Statistics said 661,000 jobs were created last month. The data significantly missed expectations as economists were expecting to see job gains of around 900,000.

Meanwhile, the unemployment rate came in at 7.9%, compared to August’s level at 8.4%; consensus forecasts were calling for a reading at 8.2%.

The gold market was seeing some selling pressure ahead of the report and have remained relatively unchanged in initial reaction to the data. December gold futures last traded at 1,916.60 an ounce.

According to some economists, the component in the latest jobs report that could tip the scales in gold’s favor is the disappointing earnings numbers. The report said that average hourly earnings increased by only 0.1% last month, down from August’s 0.4% rise. According to consensus forecasts, economists were expecting to see a 0.5% increase.

Economists note that U.S. consumers, making less money will be hesitant to make big purchases and without robust consumption the U.S. economy will remain weak.

While the sharp drop in the unemployment rate is definitely an attention-grabber, some economists say that it comes as the participation rate dropped. The report said that the participation rate in the U.S. labor market -- the number of people actively working or looking for work – dropped to 61.4%, down from August’s level of 61.7%.

“A falling participation isn't good for the economy and suggests some people are drifting towards long-term unemployment, or getting disconnected from the labor force,” said Adam Button, chief currency strategist at Forexlive.com

Although the U.S. economy continues to add jobs, Katherine Judge, senior economist at CIBC said that it appears the recovery is losing some momentum and could continue to struggle.

“Despite making solid progress from last quarter's depths, the US labor market remains far from healed and gains from here are likely to slow further given that there are less temporarily laid off workers to call back and the aggregate demand picture remains soft given the lack of further fiscal support as well as elevated virus cases,” she said.

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