(Kitco News) - Gold continues to hold its recent gains above $3,500 an ounce, finding solid support as more data points to a weakening labor market, with hiring in the private sector slowing more than expected.
Private-sector payroll processor ADP reported Wednesday that 54,000 jobs were lost in August, missing expectations. Consensus forecasts had projected a gain of 73,000 jobs.
“The year started with strong job growth, but that momentum has been whipsawed by uncertainty,” said Dr. Nela Richardson, chief economist at ADP. “A variety of things could explain the hiring slowdown, including labor shortages, skittish consumers, and AI disruptions.”
The gold market is experiencing renewed volatility as some investors take profits following its breakout rally earlier in the week. However, prices remain well supported in the initial reaction to the disappointing labor market data. Spot gold last traded at $3,549.30 an ounce, down 0.25% on the day.
Aaron Hill, Chief Analyst at FP Markets, said the ADP payrolls data continues to support expectations for Federal Reserve interest rate cuts later this month, which in turn should push the U.S. dollar and short-term bond yields lower, supporting gold prices.
“Gold, already trading near $3,554/oz after the weak JOLTS data, is poised for further gains following this ADP miss. A softer labor market lowers the opportunity cost of holding non-yielding gold, while a weaker USD makes it more affordable for global buyers, spurring demand. This could push gold prices toward new highs, potentially testing $3,600/oz or beyond, especially if safe-haven flows intensify amid economic uncertainty,” he said.
According to the CME FedWatch Tool, markets have nearly fully priced in a 25 basis point cut this month. There is also growing support for additional rate cuts by year-end.
The ADP report comes a day after the Labor Department reported a sharp drop in job openings in its Job Openings and Labor Turnover Survey (JOLTS).
While the labor market is slowing, wage growth remains relatively stable. Annual wages for workers who stayed in their jobs rose 4.4% in August, while those who changed jobs saw their wages increase 7.1% over the past 12 months.
