Disappointing US jobs report lifts gold price close to $1,260/oz

Gold futures prices staged a modest recovery on Friday, October 7 in the US after hovering near a four-month low in recent sessions amid a US labour market report that raised some concerns among investors.

Gold for December settlement on the Comex division of the New York Mercantile Exchange rose $4.90 or 0.4% to $1,257.90 per oz. Yesterday, the contract tumbled to its lowest since June 22.

In September, 156,000 Americans joined the labour market, below the forecast of 171,000 but another sign that the US economy is heading for its eighth year of expansion. As well, the previous month’s reading was revised upward to 167,000 from 151,000.

While average hourly earnings were in line with projections at 0.2%, the headline unemployment rate increased to 5% from 4.9%.

The dollar index consequently softened from a multi-month high to 96.66. The surge in the greenback has been the primary driver of commodity prices this week in the absence of Chinese investors for a week-long holiday.

“Gold’s sluggish price action after it peaked at $1,375 has frustrated longs and we feel profit-taking has been the major driver of its recent weakness,” FastMarkets analyst Andy Farida said. “Still, we continue to favour gold in the long run and see this as merely a test to see how resilient the bulls are.”

Currently, roughly 60 percent of investors expect the Federal Reserve to raise rates in December. With no October meeting and a presidential election approaching, December is widely seen as the last possible time for the Fed to restart the process of interest-rate normalisation.

The FOMC is deadlocked on when to raise rates, with the hawks wanting to move soon while the doves are awaiting signs of inflation.

“Financial markets are too worked up about a possible ECB taper and Fed November rate hike,” Georgette Boele, a strategist at ABN AMRO, said. “When these expectations ease again gold prices should receive some support.”

In European markets, Germany’s DAX and France’s CAC-40 were down 0.3% and 0.2% respectively while the dollar was unchanged at 1.1152 against the euro.

As for other commodities, Comex silver for December settlement recovered 21.5 cents or 1.2% to $17.560 per oz. Trade has ranged from $17.225 to $17.585.

Platinum for January delivery increased $7.50 or 0.8% to $973.80 per ounce while the most active palladium contract recently traded at $673.20 per oz, up $7.05.

(Editing by Mark Shaw) 

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