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(Kitco News) - The gold market is trying to hold critical resistance levels as the U.S. labor market loses momentum in July, even as inflation pressures remain in place.
U.S. nonfarm payrolls rose by 187,000 last month, according to the Bureau of Labor Statistics. The monthly figure was below the market consensus estimates of 205,000.
However, the report also noted that the U.S. unemployment rate saw a better-than-expected improvement, falling to 3.5%, down from 3.6% in June. Economists were expecting to see an unchanged reading.
The gold market is not seeing much reaction to the disappointing headline numbers. December gold futures last traded at $1,970 an ounce, roughly unchanged on the day.
According to some market analysts, the gold market could be struggling to gain solid bullish traction because the report noted that inflation remains a significant concern and could force the Federal Reserve to raise interest rates after the summer.
The report said that average hourly earnings rose by 14 cents or 0.4% last month to $33.74. The increase beat expectations as economists were looking for wages to rise 0.3%.
Along with the disappointing headline number, the report noted a downward revision in May and June. May's unemployment data was revised down to 281,000, down from the previous estimate of 306,000; at the same time, June's employment data was revised down to 185,000, down from the initial forecast of 209,000.
Naeem Aslam, chief investment officer at Zaye Capital Markets, said that the data would continue to fuel the ongoing tug of war in the marketplace as the latest data provides no definitive path for the U.S. central bank.
"There were also some mixed signals in the data point, which means that the Fed doesn't really have the confidence to go and increase the interest rate in the way that they would have liked," he said.
Aslam added that next week's inflation data will be a crucial piece of data for markets next week.
"Traders are highly likely to continue to live on the edge unless they see a clear downtrend in inflation, which is difficult to anticipate given an upswing in oil prices," he said.
Paul Ashworth, chief North American economist at Capital Economics noted that the disappointing data in the last two months shows job growth at its slowest pace in 2.5 years.
“The cyclical sectors of the economy contributed less than 100,000 additional jobs, pointing to a real economy that, echoing the muted survey-based evidence, is a lot weaker than the pick-up in second-quarter GDP growth suggested,” he said.
