Investing.com -- Gold pared considerable losses amid high volatility in credit and currency markets, as the prospects for a 2016 interest rate hike from the Federal Reserve increased on Friday following reports of robust domestic job gains last month.
On the Comex division of the New York Mercantile Exchange, Gold for August delivery traded between $1,336.50 and $1,371.35 an ounce, before settling at $1,358.10, down 4.00 or 0.29% on the session. Gold closed lower for the second consecutive session, retreating from 28-month highs of $1,374.90 from earlier this week. Despite the mild losses, the precious metal is still up nearly 7% since voters in the U.K. approved a referendum paving the way for Britain's departure from the European Union late last month. Since opening the year around $1,075 an ounce, Gold has surged more than 28% amid indications of a potential global recession.
Gold likely gained support at $1,323.50, the low from June 8 and was met with resistance at $1,391.40 the high from March 17, 2014.
On Friday morning, the U.S. Department of Labor's Bureau of Labor Statistics said nonfarm payrolls rose by 287,000 in June, defying expectations for an increase of 180,000 and posting the highest monthly gains in eight months. The struggling labor market demonstrated broad signs of improvement last month following downwardly revised gains of 11,000 in May, providing indications that the weak hiring period in late-Spring could have been an anomaly. Nevertheless, the three-month moving average fell sharply to 147,300, in line with the Fed's expectations, down from 195,700 over the first quarter.
Within the report, the gains were concentrated in leisure and hospitality, health care and social assistance and financial assistance. The leisure and hospitality category added 58,000 positions for the month after remaining relatively flat in May. The telecommunications industry also experienced a snapback, adding 28,000 positions as thousands of Verizon workers returned to work following a labor dispute the previous month. At the same time, the struggling manufacturing sector reported a rare gain, adding 14,000 jobs on the month. Notably, approximately 90% of the job increases in June went to workers aged 55 or above.
Meanwhile, the unemployment rate rose moderately by 0.2 to 4.9%, remaining below the Fed's objective of 5%, while the labor force participation rate inched up by 0.1 to 62.7%. The U-6 Unemployment Rate, which measures workers who are marginally attached to the labor force and are no longer looking for full-time work, fell 0.1 on the month to a seasonally-adjusted 9.6%. By comparison, the Fed's preferred gauge for unemployment, stood at 10.5% a year ago and peaked at 18.0% during the height of the Great Recession.
On Wednesday, the minutes from the Federal Open Market Committee's (FOMC) June meeting depicted a divided Fed on the long-term outlook for future interest rate hikes. At last month's FOMC monetary policy meeting, participants cited a slowing labor market and the threat of a British exit from the EU as main factors for holding interest rates steady. Following the release of Friday's job report, analysts from Goldman Sachs Group Inc (NYSE:GS) said there is roughly a 66% chance that the FOMC will raise its benchmark Federal Funds Rate at some point this year.
Investors who are bullish on Gold are in favor of a gradual tightening of monetary policy by the Fed. Gold, which is not attached to interest rates, struggles to compete with high-yield bearing assets in rising rate environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, stood at 96.37 in U.S. afternoon trading, up 0.04% on the session. Earlier, the index hit an intraday high of 96.71, in response to the employment situation.
Dollar denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for August delivery jumped 0.219 or 1.10% to $20.57 an ounce. On Monday, the front month contract for silver futures surged above $21.20 an ounce to hit fresh two-year highs.
Copper for September delivery fell 0.003 or 0.12% to $2.121 a pound.