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Gold prices pop above $2,000 as U.S. economy created 150K jobs in October, missing expectations

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(Kitco News) - Gold prices are back above $2,000, seeing new momentum as the U.S. labor market cooled last month, with the economy creating fewer jobs than expected.

U.S. nonfarm payrolls rose by 150,000 last month, according to the Bureau of Labor Statistics. The monthly figure was below the market consensus estimates of 178,000.

At the same time, the report also noted that the U.S. unemployment rate ticked higher, rising to 3.9% in October. Economists were expecting to see an unchanged reading at 3.8%.

The disappointing employment numbers have created solid buying momentum, with gold prices trading near session highs. December gold futures last traded at $2,006.40 an ounce, up 0.66% on the day.

Along with the weak employment gains, the report also revised down August and September estimates. September's employment numbers were revised down to 297,000 from the initial estimate of 336,000. At the same time, August's employment data was revised to 165,000, a drop of 62,000 jobs from the previous forecast.

The report also noted that wage growth is starting to weaken. Last month, average hourly wages increased by seven cents or 0.2%. According to consensus estimates, economists were looking for a 0.3% increase.

"Over the past 12 months, average hourly earnings have increased by 4.1 percent," the report said.

According to some economists, weak employment and wage growth will support market expectations that the Federal Reserve has finished its tightening cycle.

"The strongest argument for the Fed to abandon its tightening bias is that wage growth continues to slow – with average hourly earnings rising by a muted 0.2% m/m and the annual growth rate falling to 4.1% - the lowest since mid-2021. The decline in the job quits rate continues to suggest it will drop below 4% soon," said Andrew Hunter, deputy chief U.S. economist at Capital Economics. "Overall, we suspect the softening in labor market conditions has much further to run and still expect the Fed to be cutting interest rates again in the first half of next year."

The latest nonfarm payrolls data comes just days after the Federal Reserve announced that it would leave interest rates unchanged in a range between 5.25% and 5.50%.

However, during his press conference, Powell maintained his tightening bias, saying interest rates might not yet be restrictive enough.

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