Gold lost some of its shine on Friday due to the robust US labor market data.
The COMEX gold prices fell following the release of US non-farm payroll and unemployment rates. Prices have since recovered and are now slightly in the black.
Gold prices have been struggling throughout the day, as positive US labor market data could lead the Federal Reserve to cut interest rates dramatically.
Gold is in high demand as lower interest rates encourage the purchase of this precious metal, which does not yield any income like bonds.
The price of COMEX Gold was $2,686.50 an ounce at the time this article was written, which is up 0.2% compared to the previous close.
Strong US labor market data dims gold’s appeal
The US Bureau of Labor Statistics reported that 254,000 new jobs were added in September.
This is higher than the revised upwards 159,000 for August and above the economists’ expectation of 140,000.
In September, the US unemployment rates fell from 4.2% to 4.1%, a decrease of 0.1% compared to August’s rate.
The average hourly earnings for the US increased by 4.0% from 3.9%, which was revised upwards in August. This was higher than expected at 3.8%.
The Fed may be hesitant to cut rates if the labor market is strong.
Positive labor market data in the US indicates that the economy remains resilient and is much better positioned than originally anticipated.
Fxstreet.com stated in a recent report:
Federal Reserve (Fed), at its November meeting, is less likely than ever to introduce a rate cut of 50 basis points in two doses.
The Fed reduced interest rates by 50 basis points at its policy meeting in September, for the first cut in over four and a quarter years.
Since then, the market has been hoping for an identical reduction in interest rates at the US central banks policy meeting scheduled for November.
Gold prices are supported by demand for safe-havens
Gold has become a safe haven asset at a time of increasing geopolitical tensions in the Middle East.
Israel is expected to respond to the attack by Iran on Tuesday. The tensions could rise further.
The gold price spent the majority of Friday in the red. However, the prospect of further tensions in Middle East caused the precious metals regain all their losses.
Fxstreet.com stated that “the yellow metal’s appeal as an investment asset is enhanced by the general trend of lower global interest rates,” which allows Gold to remain attractive.
Gold prices outlook
According to ANZ Research the disinvestment of gold-backed exchange traded funds is continuing and speculative holdings have increased.
The research firm stated in a recent report that “low levels of gold investment are a possible driver” as they limit the possibility for heavy liquidation, and indicate the potential for new buying.
Investment demand can help mitigate the challenges of high gold prices.
ANZ Research stated:
In the case of jewellery, less days in India and China deemed auspicious to celebrate weddings could be a hindrance. The central bank purchases have slowed. China stopped purchasing in May.
Fxstreet editor Joaquin Monfort says that a COMEX gold price drop to $2,625 per ounce is likely if the COMEX gold price breaks below $2,680.
He said that if prices fell below $2,600 they would find support.
A rise in gold prices above $2673 per ounce could lead to a record-breaking price of $2700 an ounce.
This post, Strong US Labor Market Data Takes Some Shine off Gold may be updated as new information unfolds.
