Gold Futures Climb As U.S. Jobs Data Show Smallest Rise Since 2020

(July 7,2023- Myra P. Saefong and Joseph Adinolfi )

Silver and copper futures also gain on Comex

Gold prices headed higher on Friday as the U.S. Department of Labor's June jobs report revealed the smallest increase since 2020.

The weaker-than-expected rise in employment last week raised some questions over how many interest rate rises the Federal Reserve will need to make this year after a decision last month to pause them.

The U.S. created 209,000 new jobs in June, U.S. government data showed Friday. That was the smallest increase in more than two and a half years. Economists had forecast an increase of 240,000 new jobs, according to a Wall Street Journal survey.

Following the data, the "knee-jerk spike in gold prices was swiftly tapered by the notion that this latest U.S. jobs report won't yet allow the Fed to halt its rate hikes, noting that June's unemployment rate ticked back lower, while wage growth exceeded market expectations," said Han Tan, chief market analyst at Exinity Group.

"Bullion bulls should find themselves on a slippery slope until the Fed is truly ready to hit pause on this rate-hike cycle," he told MarketWatch. Gold futures trade little changed from a week ago.

Sub-$1,900 price levels "still beckon for the precious metal over the near-term should markets ramp up bets for yet another Fed rate hike after July, especially if next week's core CPI prints point to still-stubborn inflationary pressures," said Tan.

Gold prices had slumped to their lowest level since March on Thursday following the ADP survey of private sector U.S. employment which reported nearly half a million new jobs were created in June, suggesting the economy was strong enough to warrant another interest rate rise by the Federal Reserve in July to combat inflation.

The data roiled markets, sending U.S. stocks sliding while Treasury yields shot to three month highs. The boost to Treasury yields and the dollar helped to weigh on gold.

"Gold came under pressure in the aftermath of yesterday's ADP report but managed to hold above $1,900 and even recoup some of its losses. It's trading marginally higher today but whether it will be able to hold onto those gains, and remain above $1,900, will probably depend on what kind of jobs report we get," said Craig Erlam, senior market analyst at OANDA, in emailed commentary.