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Gold prices holding near $1,800 as U.S. economy creates 531K jobs in October

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(Kitco News) - Gold prices are fighting to hold resistance just below $1,800 as more Americans found jobs in October.

Friday, the Bureau of Labor Statistics said 531,000 jobs were created last month. Economists were expecting to see job gains of around 425,000.

Gold prices have lost some ground in initial reaction to the labor market data. But after an initial drop, it has found some buying interest. December gold futures last traded at $1,791 an ounce, down 0.13% on the day.

Not only did the U.S. economy create more jobs than expected, but the report said that the unemployment rate dropped to 4.6%, down from September's 4.8%. Economists were expecting to see a reading around 4.7%.
While the unemployment rate dropped, the report also noted that the participation rate fell to 61.6%. Economists were expecting the participation rate to hold steady at 61.7% expected. Before the pandemic, the rate was 62.8%.

According to some analysts, while the headline number was better than expected, gold prices could be reacting to a further rise in wage inflation. The report said that last month's average hourly wages increased by 11 cents or 0.4% to $30.96.

"Over the past 12 months, average hourly earnings have increased by 4.9 percent," the report said.

Some analysts have described the latest employment report, something all investors will be happy with.

"This is a good report for everyone. There's some strength here but not enough to shake the Fed from its 'transitory' narrative," said Adam Button, chief currency strategist at Forexlive.com.

Katherine Judge, senior economist at CIBC, noted that while the U.S. labor market has made some significant progress so far this year, there is still a lot of work to be done.

"While better than expected, this print still leaves the unemployment rate 1.1%-points above the lows the Fed is aiming to see in the next two years," she said.

Michael Pearce, senior U.S. economist at Capital Economics, described the latest labor market data as improving, but still muted. He added that the weak participation numbers will continue to drive wage inflation higher.

"For now, Fed officials are emphasizing the shortfall in employment as evidence that the economy is still far from their long-run goals, with officials still arguing that participation rates will rebound as virus fears and caregiving burdens ease. But with the labor force showing no acceleration even as case numbers drop back, we're increasingly convinced that the fall in participation since the beginning of the pandemic will prove permanent," he said.

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