(Kitco News) - The gold market remains under pressure but holds above the $1,850 mark as it sees little movement following solid growth in the U.S. labor market.
Friday, the Bureau of Labor Statistics said 390,000 jobs were created in May. The data beat expectations economists were forecasting job gains of around 325,000.
Meanwhile, the unemployment rate missed expectations, holding at 3.6%. Economists were expecting to see a drop to 3.5%.
The gold market was under pressure ahead of the latest employment numbers. However, the precious metal is still holding solid gains above the critical psychological level at $1,850 an ounce. August gold futures last traded at $1,867.60 an ounce, down 0.20% on the day.
Some market analysts have said that the gold market is holding up relatively well following the solid employment data because of weaker than expected inflation pressures.
The report said that average hourly wages rose by 10 cents or 0.3% to $31.95 last month. According to consensus forecasts, economists were expecting to see a 0.4% increase.
For the year, average wages have increased 5.2%, the report said.
Economists have said that the slower pace of wage inflation could give the Federal Reserve some room to be less aggressive as it tightens its monetary policy. The U.S. central bank has said it is looking to raise interest rates by 50-basis points at the next couple of meetings. At the same time, markets are pricing in three 50-basis point moves.
However, other economists have said that the labor market continues to run hot, and there needs to be more evidence that wage inflation is under control.
“Overall, with hiring remaining at a solid pace, we’re clearly still on track for 50bps rate hikes at the next two FOMC meetings. We’ll need to see employment gains running well below the current pace to prevent the further tightening in labor markets that the Fed wants to avoid,” said Katherine Judge, Senior Economist at CIBC.
Michael Pearce, Senior U.S. Economist at Capital Economics, said that the Federal Reserve remains on pace for two rate hikes.
“The deceleration in wage growth is encouraging because it suggests that the broader cyclical price pressures in the economy are close to peaking. But it will take a slowdown in annual wage growth to closer to 4% before the Fed can claim it is making significant progress towards its inflation goal,” he said.
