(Kitco News) - U.S. recession fears could start to ease as the U.S. economy created more jobs than expected last month.
The gold market is taking the new momentum in the labor market in stride as it continues to test long-term support just above $1,730 an ounce.
Friday, the Bureau of Labor Statistics said 372,000 jobs were created in June. The data significantly beat expectations economists were forecasting job gains of around 260,000.
Meanwhile, the unemployment rate was in line with expectations holding steady at 3.6%.
The latest economic data does not provide a lot of good news for gold investors; however, the precious metal is holding in neutral territory for the day in initial reaction to the labor market report. August gold futures last traded at $1,736.40 an ounce, down 0.19% on the day.
It has not been a good week for gold as prices are down roughly 4% as markets continue to focus on the Federal Reserve’s aggressive monetary policy tightening. Some economists have said that the latest employment data won’t change expectations for a 75 basis point hike at the end of the month.
"The Fed wants to see some moderation in the labor market in order to cool wage pressure but there are no signs of it here," said Adam Button, chief currency strategist at Forexlive.com. "This increases the odds of a 75 bps hike at the end of the month and of the Fed continuing to hike beyond 3.5% early next year."
Although the headline employment number was better than expected the report noted downward revision in May and April. May’s employment gains was revised to 384,000, down from the previous estimate of 390,000. At the same time, April’s data was resived to 368,000, down from the prior estimate of 436,000.
The gold market also won’t find much bullish traction on the inflation front as wage growth rose in line with expectations. The report said that In June, average hourly earnings rose by 10 cents, or 0.3%, to $32.08. Over the past 12 months, average hourly earnings have increased by 5.1%.
However, economists note that higher wages could lead to sticky inflation, even if it has peaked.
Andrew Hunter, Senior U.S. Economist at Capital Economics, said that the latest employment data makes a “mockery” of recession talk.
“The June gain leaves the three-month average increase at a rock-solid 375,000, well above the outright stagnation typically seen in the run-up to economic downturns,” he said.
Hunter added that the data could solidify the case for the Federal Reserve to raise interest rates by 75 basis points.
