(Kitco News) - The gold market continues to test new support around $4,300 an ounce and is attracting modest bullish momentum as the U.S. labor market remains relatively resilient but shows signs of slowing.
After another significant delay in the release of the nonfarm payrolls report, the Labor Department said that 64,000 jobs were created in November. Employment gains beat expectations, as consensus forecasts had called for job growth of 51,000.
Although the data show U.S. employment growth rising more than expected, economists note that the report also points to a clear slowing trend in the labor market. The unemployment rate rose to 4.6%, up from September’s reading of 4.5%. Economists had expected the unemployment rate to remain unchanged.
No employment data were released for October due to the 43-day government shutdown.
Although the headline employment data beat expectations, the U.S. labor market continues to see significant revisions. August’s employment data were revised to show a contraction of 26,000 jobs, compared to the previous estimate of a 4,000-job decline.
At the same time, September’s employment numbers were revised down to 108,000 from the initial estimate of 119,000.
The gold market saw volatility in its initial reaction to the mixed labor market data. Spot gold last traded at $4,307.40 an ounce, roughly unchanged on the day.
In further disappointing news, the report also noted that wage growth was weaker than expected. Average hourly earnings rose 0.1% last month to $36.86, compared to a 0.2% increase in September. Economists had expected wages to rise by 0.3%, according to consensus forecasts.
This marked the weakest pace of wage growth since March 2024.
Although the U.S. economy continues to create jobs, some economists have said that November’s figures are not strong enough to prevent the Federal Reserve from cutting interest rates next year.
Markets are currently pricing in three potential rate cuts in 2026.
While falling interest rates generally support gold by lowering the opportunity cost of holding a non-yielding asset, some analysts see downside risks for the metal following the data.
Aaron Hill, Chief Market Analyst at FP Markets, said weak wage growth creates a slight headwind for gold as an inflation hedge.
“Gold around $4,290–$4,300 faces renewed downside pressure from the wage miss reducing inflation fears,” he said. “Near-term volatility favors lower prices, targeting $4,220 on follow-through U.S. dollar strength, though risk-off flares could spark rebounds to $4,320. We lean short with stops above $4,310.”
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, said that he expects the Federal Reserve to continue easing interest rates in the new year.
“The Fed should continue to cut rates because the risks to full employment are greater than the risks to inflation (i.e. price stability), but with the reluctance with which the Fed cut last week (as evidenced by the dot plot and forward looking projections), it remains to be seen how attentive they are to the labor market versus the fact that inflation has remained stubbornly above their 2% target,” he said in a note.
