(Kitco News) - The gold market continues to see further volatility as Tuesday’s sharp selloff has attracted some buying interest; however, according to some analysts, the precious metal faces a fundamental headwind following better-than-expected private-sector employment data.
ADP reported Wednesday that 63,000 jobs were created in February, significantly beating expectations. Consensus forecasts had projected job gains of 50,000. The report revised January’s employment data to show that only 11,000 jobs were created at the start of the new year.
The gold market is not seeing much reaction to the latest employment data, as price action is being driven by technical momentum following Tuesday’s 4% drop. Spot gold last traded at $5,193.22, up 2% on the day.
Although the headline number was better than expected, Dr. Nela Richardson, chief economist at ADP, said the labor market still faces some challenges.
“We've seen an increase in hiring and pay gains remain solid, especially for job-stayers,” Richardson said in the report. “But with hiring concentrated in only a few sectors, our data shows no widespread pay benefit from changing jobs. In fact, the pay premium for switching employers hit a record low in February.”
Although the labor market remains fairly resilient, the report noted mixed wage growth. Wages for workers who stayed in their jobs rose 4.5% annually last month. Meanwhile, wages for workers who changed jobs slowed to 6.3%.
Although wage inflation is not accelerating, some analysts have said the mixed labor market data might not be strong enough to force the Federal Reserve to aggressively cut interest rates this year. Markets are expecting the central bank to maintain its neutral policy stance until at least the summer.
Some analysts have said that while gold continues to benefit as an important safe-haven asset, it needs to see clear guidance from the Federal Reserve before breaking to new all-time highs.
Even after the U.S. and Israel launched military strikes against Iran, gold was unable to hold gains above $5,400 an ounce.
