Gold futures finished lower on Friday, coming off a one-month peak as the U.S. jobs report showed employers hired far more workers than expected in July, pushing Treasury yields and the dollar higher.
Price action
-
Gold futures for December delivery
GC00,
+0.65% GCZ22,
+0.65%
dropped $15.50, or 0.9%, to finish at $1,791.20 per ounce on Comex. Based on the most-active contract, gold gained 0.5% for the week, according to Dow Jones Market Data. -
Silver for September delivery
SI00,
+2.39% SIU22,
+2.39%
was down 28 cents, or 1.4%, to settle at $19.842 per ounce. Silver lost 1.8% for the week. -
Palladium
PAU22,
-2.95%
for September delivery gained $51, or 2.5%, to finish at $2,128.50 per ounce, while platinum
PLV22,
+0.42%
for October delivery climbed $1.5, or 0.2%, to end at $924.70 per ounce, ending the week with a gain of 3.9%. -
Copper
HGU22,
-0.73%
for September delivery rose 7 cents, or nearly 1.9%, to end Friday at $3.552 — down 0.6% for the week.
Market drivers
The U.S. economy added a surprisingly strong 528,000 new jobs in July, the Labor Department said on Friday. The unemployment rate fell to pre-pandemic levels despite two straight quarters of GDP economic contraction.
Economists polled by The Wall Street Journal had called for a 258,000 payrolls gain. The unemployment rate slipped to 3.5% from 3.6%.
“Today’s labor market report is bad news for gold bulls, with next week’s CPI report the next key test,” said Michael Hewson, chief market analyst at CMC Markets, in a note.
The robust July jobs report is seen reinforcing expectations the Federal Reserve will continue to move aggressively to tighten monetary policy as it attempts to bring down the highest inflation in more than four decades without spiking unemployment and causing a recession.
This week, gold prices topped the key $1,800 level to a one-month high as investors hope the employment report could help clear away some recession fears. However, Federal Reserve officials warned that achieving a so-called soft landing for the economy as they raise interest rates to battle inflation will be difficult.
Fed-funds futures traders now priced in a 67.5% chance of a 75 basis point rate hike in September, up from 34% a day ago. The Bank of England Thursday hiked interest rates by 50-basis-point as it predicted U.K. inflation may hit double digits by the end of 2022, while warning that a long recession is on its way.
Meanwhile, geopolitical tensions remained in focus as China continued its military exercises in response to U.S. House Speaker Nancy Pelosi’s Taiwan visit earlier this week. Beijing has suspended cooperation with Washington in a number of areas, including dialogue between senior-level military commanders and climate talks. China also announced that it will impose sanctions against Pelosi and her immediate family in response to what Beijing termed her “vicious” and “provocative” actions.
Treasury yields jumped sharply Friday in the wake of the employment report with the yield on the 2-year Treasury note
TMUBMUSD02Y,
rising to 3.218%, while the 10-year Treasury note
TMUBMUSD10Y,
climbed to 2.841%.
The U.S. dollar index
DXY,
was up 0.9% to 106.62, after sliding 0.7% on Thursday, the largest fall since July 19, making the yellow metal less appealing for other currency holders.
U.S. stocks traded higher earlier this week, booking powerful gains after rosy corporate earnings and better-than-expected manufacturing data calmed recession fears. However, the benchmarks
SPX,
DJIA,
COMP,
were lower on Friday after robust July jobs report fueled Fed rate hike expectations.
Hear from Ray Dalio at the Best New Ideas in Money Festival on Sept. 21/22 in New York. The hedge-fund pioneer has strong views on where the economy is headed.
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