(Kitco News) - The gold market surged to session highs as the U.S. labor market cooled more than expected.
On Friday, U.S. nonfarm payrolls rose by 142,000 last month, according to the Bureau of Labor Statistics. This figure fell short of the consensus estimate of 164,000.
While the labor market continues to cool, the decline remains relatively orderly. The unemployment rate ticked down to 4.2%, in line with expectations and down from July's surprising rise to 4.3%.
The gold market saw solid gains in response to the weaker-than-expected employment data. December gold futures last traded at $2,558.60 per ounce, up 0.61% for the day.
Although the headline number missed expectations, there was some good news for American workers. The report indicated that wages increased by 0.4%, an improvement from July's 0.2% rise. Wage growth exceeded expectations, as economists had anticipated a 0.3% increase.
"Over the past 12 months, average hourly earnings have increased by 3.8%," the report stated.
In addition to disappointing job growth in August, the report noted further downward revisions to the June and July data. July's employment numbers were revised down to 89,000 from the initial estimate of 114,000. Similarly, June’s numbers were revised to 118,000, down from the previous estimate of 179,000.
"With these revisions, employment in June and July combined is 86,000 lower than previously reported," the report said.
Markets are viewing the latest employment data through a dovish lens, which is supporting gold prices. Expectations for the Federal Reserve to aggressively cut interest rates later this month have increased in response to August's nonfarm payroll numbers. According to the CME FedWatch Tool, markets see a 49% chance of a rate cut on September 18.
However, some analysts remain unconvinced. Michael Brown, Senior Research Strategist at Pepperstone, described the employment report as a mixed bag, complicating the Federal Reserve's monetary policy decision.
"Doves will point to the cooling pace of headline payroll growth as potential justification for a larger 50 basis point cut. Meanwhile, hawks could reasonably argue that the lack of further cooling compared to the July report, along with strong earnings growth, warrants a more modest 25 basis point cut. My base case remains the latter, particularly given the risk of sparking market panic with a larger cut," Brown said in a note.
