(Kitco News) - The gold market continues to hold on to solid gains and could attract renewed buying as the U.S. labor market continues to show signs of cooling, with the number of available jobs dropping more than expected in June.
June job openings—a measure of labor demand—fell to 7.36 million, down from May’s downwardly revised 7.54 million, according to the Labor Department’s monthly Job Openings and Labor Turnover Survey (JOLTS). The figure also came in weaker than expected, as economists had forecast job openings to decline to 7.44 million.
The gold market caught a modest bid in its initial reaction to the disappointing labor market data. Spot gold last traded at $4,085.80 an ounce, up 0.75% on the day.
The Federal Reserve’s new tightening bias has put pressure on gold, as growing expectations of a rate hike due to persistent inflation have increased the opportunity cost of holding a non-yielding asset.
However, analysts have noted that the U.S. labor market has been a significant pillar of strength for the economy. If that starts to weaken, it could force the Federal Reserve to at least delay further rate hikes.
Greg Michalowski, currency analyst at InvestingLive.com, said the data points to a labor market that remains broadly stable.
“Job openings, hiring, quits, and layoffs all showed little change, suggesting labor demand and worker mobility continue to cool gradually rather than deteriorate sharply,” he said.
Looking at the components of the report, the number of hires was relatively unchanged at 5.3 million, while the hiring rate held steady at 3.4%.
Within separations, quits totaled 3.2 million, while layoffs and discharges came in at 1.8 million. Both figures were unchanged from the previous month.
Petros Pantzari, Chief Dealer at Monaxa, said that while the labor market remains resilient, the trend is still slowing, which will ultimately support gold prices.
“This is not a recession siren, but it is a clear loss of economic horsepower—employers are becoming more cautious just as factory demand slips back into reverse,” he said. “Gold has moved higher because traders are reading the numbers as evidence that growth is losing steam, strengthening the case for lower interest rates and reducing the opportunity cost of holding the metal. For the Fed, this is a dovish nudge; for markets, it is a classic bad-news-is-good-news setup, with gold shining as confidence in the US growth engine begins to dim.”
