Investing.com -- Gold surged on Friday reaching its highest level in 13 months, as market players wagered that the Federal Reserve will slow the pace of its tightening cycle after average hourly wages stagnated last month.
On the Comex division of the New York Mercantile Exchange, gold for April delivery traded in a broad range between $1,251.30 and $1,280.60 an ounce, before settling at 1,270.90, up 12.70 or 1.01% on the day. At session highs, gold futures reached their highest level since early-February of last year. After enjoying 10% gains last month, gold remains on pace for its strongest quarter in three decades.
Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,280.60, the high from Feb. 3, 2015.
While Friday's monthly jobs report from the U.S. Department of Labor could mostly be characterized as positive, investors focused on a slight decrease in average hourly earnings by 0.1% in February following robust gains of 0.5% a month earlier. It marked the first decline in hourly wages for a single month since the end of 2014. For all employees on private nonfarm payrolls, average hourly earnings fell 0.03 to $25.35 following gains of 0.12 in January. Wages among nonsupervisory employees and workers in private-sector production were unchanged at $21.32 an hour. On an annual basis, average hourly earnings rose by 2.2%, falling by 0.3% from the previous month after a host of state minimum wage increases went into effect at the start of the year.
Over the last several years, the Federal Open Market Committee has expressed significant concerns related to the slow pace of wage growth, as the U.S. economy continues to recover from the Great Recession. The disappointing reading could compel the U.S. central bank to delay the timing of its next interest rate hike beyond the first half of 2016. At the end of last year, the FOMC raised the target range of its benchmark interest rate by 25 basis points to 0.25 and 0.50%, ending a seven-year zero interest rate policy.
The CME Group's (NASDAQ:CME) Fed Watch tool lowered the probability of an interest rate hike at the FOMC's meeting on March 15-16 to zero on Friday, down from 29.6% a day earlier. The CME also reduced the odds of a June rate increase from 29.6% on Thursday to 25.7% following the release.
Any rate hikes this year are viewed as bearish for gold, which struggles to compete with high yield bearing assets in rising rate environments.
Nonfarm payrolls, meanwhile, soared by 242,000 in February, above consensus estimates of 190,000 and significantly higher than January's upwardly revised total of 172,000. The Labor Department reported employment gains in Health Care, Social Assistance and Food Services and Drinking Places, while recording losses in the struggling mining sector. Since December, the U.S. economy has added an average of 225,000 jobs per month.
The unemployment rate remained steady at 4.9%, one month after falling to its lowest level in eight years. The U-6 unemployment rate, which measures the level of workers that are marginally attached to the labor market, fell 0.2 to 9.7%. By comparison, the Fed's preferred gauge of U.S. unemployment, peaked at 18% in 2010 at the end of the Financial Crisis.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.35% to an intraday low of 97.03, before rallying to 97.35 in U.S. afternoon trading.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for March delivery soared 0.574 or 3.73% to 15.705 an ounce.
Copper for March jumped 0.065 or 2.92% to close at 2.273 a pound.