Gold climbed on Friday, adding to its roughly 4% surge for August, after a closely watched snapshot of the U.S. job market revealed tepid late-summer hiring and almost no paycheck growth.
The report keeps alive the close debate over whether the Federal Reserve has a green light to raise interest rates again this year given still-concerning low inflation readings, including within wage data.
“A weaker-than-expected U.S. employment report that put strong selling pressure on the U.S. dollar index is boosting the precious metals markets,” said Jim Wyckoff, senior analyst with Kitco.
In response, December gold added $6.80, or 0.5%, to $1,329.00 an ounce. It settled at $1,322.20 Thursday, its highest finish since Sept. 29 last year, according to FactSet data. The most-active contract’s 4% August climb was the largest monthly gain since January. Gold finished at an 11-month high to close the books on August.
The ICE Dollar index a gauge of the buck against a half-dozen currencies, was little changed after falling in the immediate wake of the report. The greenback’s closely followed index has largely been under pressure since the start of the week, touching its lowest level since January 2015. Stocks, however, pointed higher despite the weak hiring headlines, keeping significant markers for the major equity averages in reach.
The U.S. created 156,000 new jobs in August, a lighter-than-expected increase, but chalked up in large part to regular seasonal slowing. Unemployment rose a tick to 4.4% from a 16-year-low 4.3%, the Labor Department said. Wages have risen 2.5% in the past 12 months, unchanged from July.
“In our view, a strong rebound in inflation is needed before rate-hike expectations rise materially and help the dollar reverse its latest downtrend,” said Charalambos Pissouros, senior analyst with IronFX.
“The minutes of the [Fed’s] July gathering showed that the number of policymakers who are concerned with regards to inflation has increased, while data after that meeting showed inflation remained subdued, casting more doubts on whether the softness in recent months can indeed be attributed to idiosyncratic factors.”
A weaker dollar makes gold more attractive to investors using another currency. But prospects for higher interest rates have other implications for gold; higher rates leave the nonyielding bullion less attractive compared to other assets. Thus, rate-hike skepticism has tended to boost the metal.
Gold prices have settled above the key $1,300-an-ounce level in each of the past three sessions, finding support from short covering, an increase in long positions and a generally positive price outlook for the metal as the dollar has wavered, analysts said. Short covering refers to traders who sold futures contracts in a bet that prices would fall, then bought them back to close out positions.
“Technically, December gold futures bulls have the solid overall near-term technical advantage,” said Wyckoff.
“A seven-week-old uptrend is in place on the daily bar chart. Bulls’ next upside technical objective is pushing prices above chart resistance at $1,350.00.”
As for others metals trading, a popular exchange-traded fund, the SPDR Gold Shares ETF was up 0.1%, while the VanEck Vectors Gold Miners ETF rose 0.5%.
Back on Comex, December silver rose 10 cents, or 0.6%, to $17.68 an ounce. October platinum changed hands at $1,000.10 an ounce, up $1.50, or 0.2% but December palladium added $10.15, or 1%, to $942.40 an ounce.