Gold prices struggled as the US economy created 254,000 jobs in September. The strong growth in the US labor market is creating new selling pressure on gold, causing prices to fall rapidly.
US nonfarm payrolls increased by 254,000 last month, according to the US Bureau of Labor Statistics. The monthly figure far exceeded the consensus estimate of 147,000.
At the same time, the unemployment rate fell to 4.1%, down from 4.2% in August. Economists expected the rate to remain unchanged.
Gold markets are struggling to hold their ground as the jobs data weighs on sentiment. December gold futures were last trading at $2,662.70 an ounce, down 0.62% on the day.
In addition to the strong job gains, the report also noted solid wage gains last month. Average hourly earnings rose 0.4% in September. That was higher than economists' expectations of a 0.3% gain.
“Over the past 12 months, average hourly earnings have increased 4.0%,” the report said.
The report also revised up the July and August job numbers. July's figure was revised up significantly, from 55,000 to 144,000. Meanwhile, August's jobs data was revised up to 159,000, from the initial estimate of 142,000.
According to Kitco, despite the gold sell-off when September employment data was better than expected, the gold market still controlled the pressure.
Market watchers have reduced expectations for a larger rate cut at the Federal Open Market Committee (FOMC) meeting in November, with the CME FedWatch Tool now showing a 90% chance of a 25 basis point rate cut.
“While the focus remains squarely on employment in the dual mandate, Fed Chair Jerome Powell’s recent assertion that the committee is in “no rush” to cut quickly, coupled with the data released today, means that a 25 basis point cut pace is likely at the November meeting and beyond,” said Michael Brown, senior research strategist at Pepperstone.
Analysts note that the shift in market expectations has boosted the US dollar, which could in turn weigh on gold prices.
Adam Button, head of currency strategy at Forexlive.com, noted that unemployment has fallen to its lowest level since March. “I think you can bury the idea of the Fed cutting another 50 basis points even if the October report is not very good,” he said.
Meanwhile, Paul Ashworth, chief North American economist at Capital Economics, said the possibility of a 50 basis point cut is now gone.
“We continue to expect the Fed to take a more cautious approach – cutting rates by 25 basis points at each meeting until the policy rate falls to a range of 3% to 3.25%,” he said.
Elsewhere, financial markets started to perk up on Friday as traders viewed the end of the US longshoremen's strike as a positive sign.
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