(Kitco News) -The gold market found a jolt of momentum as the U.S. labor market lost significant momentum, creating fewer jobs than expected in April.
U.S. nonfarm payrolls rose by 175,000 last month, according to the Bureau of Labor Statistics. The monthly figure missed expectations as economists were looking for job gains of 238,000.
The U.S. labor market saw its weakest growth rate since November.
At the same time, the unemployment rate increased to 3.9%. Economists were expecting to see an unchanged rate of 3.8%.
The gold market was clinging to support around $2,300 ahead of the report, and prices have seen a sold jump in initial reaction. June gold futures last traded at $2,326.10 an ounce, up 0.71T on the day.
The report also showed weaker-than-expected wage growth, easing inflation fears. Average hourly wages increased by 0.2% or $0.07 last month; according to consensus estimates, economists were expecting a 0.3% wage increase.
Over the last 12 months, average hourly wages have increased 3.9%.
Some market analysts note that the latest employment data will give the Federal Reserve some room to ease interest rates this year, even if the timing remains uncertain.
The latest employment data comes after the Federal Reserve left the Fed funds rate unchanged in a range between 5.25% and 5.50% for the sixth consecutive meeting. The Federal Reserve maintained its restrictive monetary policy as inflation pressures have remained stubbornly elevated through the first quarter of 2024.
However, Fed Chair Jerome Powell made it clear to markets that despite stubborn inflation, the central bank is not looking to raise interest rates.
"I think it's unlikely that the next policy rate move will be a hike. I'd say it's unlikely," Powell said during his press conference.
Gold's push off of support comes as the latest employment data has created new selling pressure in the U.S. dollar.
"The drop in the dollar has now completely erased gains from early in the week when the market was worried about a hawkish FOMC pivot. Instead, it's trading at three-week lows on most fronts," said Adam Button, head of currency strategy at Forexlive.com.
Although gold has bounced off its lows, David Morrison, Senior Market Analyst at Trade Nation, said that the data might not be enough to end its consolidation.
“"All in all, the Earnings data has reduced fears of inflation showing up in wages, while the increase in the [unemployment rate], and the disappointing payroll number provide some evidence of an economic slowdown in the U.S., or at least that it’s not running away with itself. Rather than traders interpreting this as a signal for the Fed to cut rates (which is unlikely given Wednesday’s comments at the FOMC), it does bolster Powell’s statement that the Fed won’t be hiking,” Morrison said in a comment to Kitco News. “It has also shifted the probability of the first cut back to September from November. As far as gold’s concerned, no long-term indication. It just has to break out of its rut, and the buyers will be back."
