Gold futures closed lower on Friday after giving back earlier gains following the release of a disappointing headline number in a U.S. Non-Farm Payrolls report. Gold surged after the lower-than-expected results were released in what appears to have been a knee-jerk reaction to the news. Traders initially responded to a weaker U.S. Dollar, but eventually, a rise in U.S. Treasury yields proved to be too much for bullish traders to handle.
On Friday, December Comex gold futures settled at $1757.40, down $1.80 or -0.10%. This is down from an intraday high of $1782.40.
Despite the early spike to the upside, there is no proof of actual buying. What likely fueled the move was short-covering because of the surprise in the headline number of the jobs report. The selling, however, was real because it looks as if two-thirds of the jobs data and last month’s higher revision were enough to keep the Federal Reserve on track for the start of tapering in November.
US Non-Farm Payrolls Report
The U.S. economy created the fewest jobs in nine months in September amid a drop in hiring at schools and worker shortages, but ebbing COVID-19 cases and the end of generous unemployment benefits could boost employment gains in the months ahead.
Additionally, the unemployment rate dropped to an 18-month low, and wages accelerated further. In other signs of labor market tightness, permanent job losses decreased and fewer people were experiencing long spells of unemployment.
According to the Labor Department’s closely watched employment report, Non-Farm Payrolls increased by 194,000 jobs last month. Data for August was revised to show 366,000 jobs created instead of the previously reported 235,000 positions.
Economists polled by Reuters had forecast payrolls would increase by 500,000 jobs, with estimates ranging from as high as 700,000 jobs to as low as 250,000. Despite the gain, employment is still 5.0 million jobs below its peak in February 2020.
The unemployment rate of 4.8% was down four-tenths of a percentage point from August, while average hourly earnings increased 0.6% from 0.4% in August. The average workweek also lengthened by 0.2 hours to 34.8 hours.
With wage inflation rising, September’s meager payrolls gains probably will not deter the Federal Reserve from beginning to scale back its massive monthly bond-buying program this year.
The Fed signaled last month that it could start tapering its asset purchases as soon as November. Economists expect that announcement will come at the November 2-3 policy meeting.
Gold traders should use Friday’s price action as a blue print for future traders – meaning sell rallies.