Metals Stocks: Gold drops to lowest price in over 2 weeks as dollar strengthens after jump in U.S. private-sector jobs

Gold prices dropped on Thursday, losing their grip on the key $1,900 level to mark the lowest settlement in more than two weeks, as the U.S. dollar strengthened following a jump in U.S. private-sector payrolls data for May.

While the 13% gain in gold prices since March 2021 has been “impressive, confidence has actually been fragile and momentum was already easing off” before the ADP private-sector jobs data and correction in prices for the metal on Thursday, said Ross Norman, chief executive officer at Metals Daily.

“Gold looked as if it was topping out,” he told MarketWatch. “Some profit taking exacerbated the decline and gold will rebuild from here.” 

“Some profit taking exacerbated the decline and gold will rebuild from here.”

— Ross Norman, Metals Daily

For now, “investors remain disappointed that gold seems to have foregone the significant gains that many other commodities have enjoyed especially as it was designed for precisely these conditions — that is to say with inflation on the near-term horizon,” said Norman.

On Thursday, gold for August delivery

fell 1.9%, or $36.60, to settle at $1,873.30 an ounce. The most-active contract fell under the key technical level of $1,900, and finished at its lowest since May 18, FactSet data show. On Wednesday, prices settled at $1,909.90, the highest since Jan. 7.

U.S. private-sector employment surged by 978,000 in May, according to the ADP National Economic Report released Thursday. That was well above the rise of 680,000 forecast by economists surveyed by The Wall Street Journal.

Government data, meanwhile, showed U.S. Initial weekly jobless claims dropped for a fifth week in a row, by 20,000 to 385,000.

“Job growth is key to the short term trend in the greenback, as well as the gold price,” said Chintan Karnani, director of research at Insignia Consultants, in a market update.

Following the data, the ICE U.S. Dollar Index

rose 0.7%. A stronger dollar can make assets priced in the currency such as gold less attractive to overseas buyers.

Still, Karnani questioned whether gold has formed a short-term top following the ADP jobs data, and said that would depend on the nonfarm payrolls numbers due out Friday.

If the May NFP rise tops 700,000, “along with other positive parameters, then gold will form a short-term top,” he said.

Economists forecast an overall increase of 671,000 new jobs in May in the Labor Department data due Friday.

July silver 
 meanwhile, fell 73 cents, or 2.6%, to $27.48 an ounce.

Gold had moved higher in electronic trading on Wednesday after the release of Federal Reserve’s Beige Book, which indicated inflationary pressures are still building.

Viewed as a traditional hedge against inflation, gold and other precious metals have been on a trek higher amid investor worries about inflation and how the Fed might respond. The U.S. economy, in particular, has come roaring back from the pandemic, but with signs of inflation building.

On Wednesday, Philadelphia Fed President Patrick Harker said that it was time to start thinking about discussing the time frame for scaling back the Fed’s $120 billion a month asset-purchase program. That’s as the Federal Reserve said Thursday it will sell its corporate bond portfolio acquired during the pandemic.

Among other metals, July copper 

 shed 2.8% to $4.46 a pound. July platinum 

lost 2.5% to $1,162.50 an ounce, and September palladium 

 fell 1.5% to $2,826.60 an ounce.

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