(Kitco News) - Robust growth in the U.S. labor market is creating renewed selling pressure in gold, keeping prices near session lows.
U.S. nonfarm payrolls rose by 254,000 last month, according to the Bureau of Labor Statistics. The monthly figure significantly exceeded consensus estimates of 147,000.
At the same time, the unemployment rate fell to 4.1%, down from August’s reading of 4.2%. Economists had expected the rate to remain unchanged.
The gold market is struggling to hold its ground as the employment numbers weigh on market sentiment. December gold futures last traded at $2,662.70 an ounce, down 0.62% on the day.
In addition to strong employment gains, the report noted solid wage increases last month. Average hourly wages rose by 13 cents, or 0.4%, in September. Economists had expected a 0.3% increase.
“Over the past 12 months, average hourly earnings have increased by 4.0%,” the report said.
The report also revised July and August employment numbers upward. July’s figures were revised significantly higher, to 144,000 from the previous estimate of 55,000. At the same time, August’s employment data was revised upward to 159,000, up from the initial estimate of 142,000.
Although September’s employment data was better than expected, the gold market has managed the selling pressure even as market expectations around the Fed’s monetary policy start to shift.
According to the CME FedWatch Tool, ahead of the report, markets were pricing in a more than 30% chance of a rate cut and now see less than a 1% chance.
“While focus remains squarely on the employment side of the dual mandate, Chair Powell's recent assertion that the Committee is "not in a hurry" to cut quickly, along with today's incredibly solid data slate, means that a return to a more normal cadence of 25bp cuts is likely at the November meeting, and at each meeting beyond that, until the fed funds rate returns to a neutral level next summer,” said Michael Brown, Senior Research Strategist at Pepperstone.
Analysts note that shifting market expectations have boosted the U.S. dollar, which could, in turn, lower gold prices.
Adam Button, Head of Currency Strategy at Forexlive.com noted that the unemployment rate has fallen to its lowest level since March.
“I think you can bury the idea of 50 basis points on this, even if the October report is soft,” he said.
Paul Ashworth, Chief North America Economist at Capital Economics said that he also expects a 50-basis point cut is now off the table.
“We continue to expect the Fed to take a more measured approach – cutting rates by 25bp at each meeting until the policy rate is down to between 3.00% and 3.25%,” he said.
