(Kitco News) - The gold market is attracting new bullish momentum as prices hold support near $4,700 an ounce, but analysts warn that the precious metal could see renewed selling pressure as the U.S. labor market remains relatively healthy, with the economy creating more jobs than expected in April.
U.S. nonfarm payrolls rose by 115,000 last month, according to the Bureau of Labor Statistics. This monthly figure significantly beat consensus forecasts, as economists had expected job gains of around 65,000.
“Job gains occurred in health care, transportation and warehousing, and retail trade. Federal government employment continued to decline,” the report said.
At the same time, the unemployment rate held steady at 4.3%, in line with expectations.
Gold prices managed to push higher in their initial reaction to the strong employment data. Spot gold was last trading at $4,722.40 an ounce, up 0.72% on the day.
Ahead of the report, analysts warned traders that strong employment data would be negative for gold because it gives the Federal Reserve room to focus on the inflation side of its dual mandate.
The report also noted that wage inflation was relatively benign. Average hourly wages increased by 0.2%, or 6 cents, to $37.41, according to the report. Economists had expected an increase of 0.3%.
“Over the year, average hourly earnings have increased by 3.6%,” the report said.
Although April’s report showed strong employment growth, the broader outlook still points to a cooling labor market. March employment numbers were revised higher to 185,000 jobs from the initial estimate of 178,000. However, February’s losses were revised lower to 156,000 from the previous estimate of 133,000 jobs.
The three-month moving average now sits at 48,000.
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, said that the latest employment numbers demonstrate that the U.S. economy continues to defy growing doomsayers.
“There are a lot of headwinds – higher oil prices, sticky inflation and higher-for-longer interest rates – and yet the labor market is adding jobs, GDP is growing and corporate profits are expanding at a rapid pace,” he said.
