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Gold Prices Drop Below $1,300 as Upbeat Jobs Report Paves Way for June Hike

CommoditiesJun 01, 2018 01:55PM ET
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Investing.com – Gold prices fell below $1,300 as an upbeat jobs report cemented investor expectations the Federal Reserve would hike rates at its meeting later this month, lessening demand for the precious metal.

Gold futures for June delivery on the Comex division of the New York Mercantile Exchange fell by $5.20 or 0.40%, to $1,294.90 a troy ounce.

Private payrolls grew by 223,000 for the May, a sharp uptick from the 163,000 in April, according to a report released Wednesday by ADP and Moody's Analytics. That beat economists’ forecast of 189,000.

The jobless rate fell to 3.8%, beating economists’ forecasts for unchanged reading of 3.9%. Average hourly earnings grew 0.3% in May, topping expectations for 0.2% rise.

Analysts at HFE said the data was “more than strong enough” for the Fed to hike rates in June, adding that further declines in the unemployment rate would likely accelerate wage growth.

“More acceleration is likely as unemployment keeps falling. The data remain more than strong enough for the Fed to tighten again at that this month’s meeting,” analysts at HFE said in a note.

Other analysts, however, played down the prospect of a faster pace of rate hikes, citing average hourly earnings at 2.7% year over year was not enough to trigger more aggressive monetary policy action.

“Average hourly earnings at 2.7% year-on-year is within the range it has trended since mid-2016 and not enough to warrant a faster pace of rate hikes,” analysts at CIBC said in a note.

Yet, traders’ expectations for a faster pace of rate hikes grew as Investing.com’s Fed Rate Monitor Tool showed the odds of a fourth rate hike at the Fed’s December meeting rose to 32.6% from 27.6% yesterday.

The jobs report helped the dollar recover its losses, and U.S. bond yields to add to gains, keeping a lid on the gold’s attempts to spark a recovery as the yellow metal remained on track to post a weekly loss.

Also weighing on the yellow metal was falling geopolitical uncertainty as Italy formed a new government, while the fallout from the ousting of Spain’s Prime Minister Rajoy following a vote of no confidence was subdued.

Gold is sensitive to moves higher in both bond yields and the U.S. dollar – A stronger dollar makes gold more expensive for holders of foreign currency while a rise in U.S. rates, lift the opportunity cost of holding gold as it pays no interest.

In other precious metal trade, silver futures fell 0.20% to $16.43 a troy ounce, while platinum futures fell 0.53% to $905.30 an ounce.

Copper rose 0.98% to $3.10.

Gold Prices Drop Below $1,300 as Upbeat Jobs Report Paves Way for June Hike
 

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Tamer Abbas
Tamer Abbas Jun 01, 2018 5:02PM ET
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