Gold futures finished sharply higher Friday after a weaker-than-expected jobs report heightened expectations that the Federal Reserve would keep interest rates lower for longer.
The Labor Department’s reportshowed that companies scaled back hiring in April, adding just 160,000 new jobs, compared with a forecast of economists polled by MarketWatch of 203,000 jobs in nonfarm payrolls. Unemployment remained steady at 5%.
June goldGCM6,+1.37%already bouncing up ahead of the closely watched report, soared $10 higher, gaining $21.70, or 1.7%, to end at $1,294 an ounce. The turn higher helped the yellow metal log a modest weekly gain of 0.3%.
Providing runway for gold to rise on the day was a modestly weaker dollar as measured by the ICE U.S. Dollar IndexDXY,+0.07%a gauge of the greenback’s strength against a basket of six rival currencies. The dollar index was relatively flat, but up 0.7% for the week.
Weakness in the labour picture is bullish for gold prices and may help to affirm the Fed’s go-slow approach to normalizing benchmark interest rates, which have remained ultralow. Reluctance to raise rates would be a drag on the buck and deliver a boost to dollar-denominated assets, like gold.
“This precious metal is bullish on the daily timeframe and the diminishing expectations that U.S. rates may be increased in 2016 may have provided an opportunity for bulls to install a round of buying momentum…,” said Lukman Otunuga, research analyst at FXTM in aFriday morning research note.
An earlier reading of private-sector employment on Wednesday sowed seeds of doubt that labour market reports would continue to be a source of strength in the economy.
Private-sector employment gains slowed markedly in April, according to a reportreleased by Automatic Data Processing on Wednesday. Employers added 156,000 jobs in April, the ADP report showed—the weakest estimate since February 2014.
On Thursday, a report of jobless claims indicated thatthe number of Americans collecting unemployment benefits is at a nearly 16-year low.
But worries about weak corporate quarterly results and tepid readings of productivity have bolstered the case that the U.S. economy is slowing.
“Now that the slipping global economy is bearing testimony to the sweeping tide of deflation and the U.S. dollar is likely to weaken further from now on, we expect $1,300 [an ounce] to be attacked again and this time more successfully,” said Julian Phillips, founder of and contributor to GoldForecaster.com.
Meanwhile, July silverSIN6,+1.03%also drew bidders, rising 20 cents, or 1.2%, to settle at $17.527 ounce. Silver has lost 1.6% on the week.
Elsewhere in the metals complex, high-grade copperHGN6,-0.09%for July delivery ended unchanged at $2.1540 a pound, July platinumPLN6,+1.77%picked up $21.30, or 2%, to close at $1,085.10 an ounce, while June palladiumPAM6,+1.29%advanced $6.50, or 1.1%, to settle at $607.20 an ounce.