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Metals Stocks: Gold futures end higher, pare weekly loss after U.S. employment data misses estimates

Gold futures ended higher on Friday after the Labor Department reported that the U.S. created 559,000 new jobs in May, missing Wall Street estimates and suggesting the Federal Reserve may maintain its easy-money policies for longer.

With the consensus “expecting an upside blow-out jobs number,” gold was set up for a fall, “as it had proven to be susceptible to good economic news or anything that would encourage the Fed to tighten its ultra-accommodative monetary policies,” Brien Lundin, editor of Gold Newsletter, told MarketWatch. “Instead, we got a number that was disappointing when measured against expectations, and the metal rebounded in response.”

Consensus estimates were for a gain last month of up to 671,000 jobs, based on a poll of economists by Dow Jones and The Wall Street Journal. The unemployment rate was expected to dip to 5.9% from 6.1%.

The unemployment rate, meanwhile, slipped in May to a pandemic low of 5.8% from 6.1%.

More broadly, “the lack of job creation is more like a lack of job acceptance, as there are plenty of jobs available and relatively few potential workers willing to accept them at current wage rates,” said Lundin.

“Given the other data indicating a hot U.S. economy, this implies continuing and even greater inflationary pressures,” he said. “Gold has also shown recently that it once again reacts positively to higher price inflation,” so the latest jobs data are “very bullish for the metal” beyond Friday’s reaction.

Gold for August delivery
GCQ21,
+1.06%

GC00,
+1.06%

climbed by $18.70, or 1%, to settle at $1,892 an ounce, after losing 1.9% on Thursday to end at its lowest since May 18. Prices based on the most-active contracts logged a loss of 0.7% for the week, FactSet data show.

Also on Comex, July silver
SIN21,
+1.47%

SI00,
+1.47%

rose 42 cents, or 1.5%, to $27.90 an ounce, after skidding 2.6% a day ago. It saw a weekly fall of about 0.4%.

Read: Why silver prices lag behind copper’s gains, but outperform gold

The labor market data suggest that the economy faces a bumpy recovery from the COVID pandemic, which may give the Federal Reserve pause when considering removing easy-money policies and normalizing benchmark interest rates, which currently stand at a range between 0% and 0.25%. That is an environment in which gold may continue to climb, analysts say.

Fed members have said that jobs are a point of focus in determining whether the economy needs further support in the recovery from COVID.

Meanwhile, the headwinds for bullion produced on Thursday were blamed on the better-than-expected U.S. private-sector payrolls report for May. The ADP report showed 978,000 new private sector jobs were created in May. That was well above the rise of 680,000 forecast by economists surveyed by The Wall Street Journal.

The dollar strengthened Thursday following the ADP data, but moved down Friday, as measured by the ICE U.S. Dollar Index
DXY,
-0.40%
,
which was off 0.4%. The 10-year Treasury note yield
TMUBMUSD10Y,
1.554%

was down at around 1.56%. Lower bond yields and a weakening dollar can make commodities priced in the U.S. currency, like gold, more attractive to buyers.

Rounding out action on Comex Friday, July copper
HGN21,
+1.32%

tacked on 1.5% to $4.53 a pound, with prices down more than 3% for the week.

July platinum
PLN21,
+0.34%

edged up by 0.2% to $1,164.40 an ounce, but marked a weekly loss of 1.5%, while September palladium
PAU21,
+0.58%

rose nearly 0.6% to $2,842.20 an ounce, ending around 0.4% higher for the week.

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