(Kitco News) - Robust job growth last month is expected to put pressure on gold prices when they open Sunday evening in Asian markets, according to some market analysts.
U.S. nonfarm payrolls rose by 178,000 in March, the Bureau of Labor Statistics reported on Friday. This figure significantly beat consensus forecasts, as economists had anticipated job gains of around 65,000.
“Job gains occurred in health care, construction, and transportation and warehousing. Federal government employment continued to decline,” the report said.
Meanwhile, the unemployment rate dropped to 4.3%, down from February’s reading of 4.4%. Economists had been forecasting an unchanged reading.
The gold market is closed for the Easter long weekend, so there is no market reaction to the better-than-expected economic data. However, some analysts have said that healthy labor market data will give the Federal Reserve some room to maintain its neutral monetary policy stance to address growing inflation fears.
Gold has been struggling recently, as the war in Iran is creating global supply chain issues, particularly in energy markets, which have pushed oil prices above $100 a barrel. The global inflation threat has caused central banks around the world to halt their easing cycles.
Analysts have said that for gold to regain its safe-haven luster, investors need to see weak economic data, as that would raise stagflation fears and force central banks to cut rates to support their domestic economies, even if inflation remains elevated.
Along with the strong headline number, the Federal Reserve also caught another break, as wage inflation was weaker than expected.
The report said that average hourly wages increased by 0.2%, or nine cents, to $37.38 last month, compared to February’s increase of 0.4%. Wage growth was weaker than expected, as economists were looking for a 0.3% increase.
While the headline number showed robust job growth, revisions since the start of the year were mixed. The report said that January’s employment data was revised up by 34,000 jobs to 160,000. At the same time, February’s numbers were revised down by 41,000 jobs to -133,000.
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, noted that most of the employment data was collected before the U.S.-Israel joint military strikes on Iran. However, he added that it shows some resilience in the economy.
“At the margin, this would make the Fed less likely to rush to cut interest rates; however, it also reinforces the idea that the job market is holding up, which should allow consumer spending to continue—a key lynchpin in this economy,” he said.
