Gold Down Almost 3% as U.S. Job Gains Crush Safe-Haven

Gold Down Almost 3% as U.S. Job Gains Crush Safe-Haven  | Jun 06, 2020 03:25

Gold Down Almost 3% as U.S. Job Gains Crush Safe-Haven

By Barani Krishnan — A surprise leap in U.S. jobs numbers for May struck a vicious blow to safe havens and gold bugs’ hopes of advancing toward the $1,800 mark.

Gold futures fell nearly 3% Friday, falling off their $1,700 perch, after the Labor Department said in its nonfarm payrolls report that 2.5 million Americans re-entered the workforce in May. Stocks on Wall Street rallied on the news, with the Dow jumping more than 3%. The dollar, a contrarian trade to gold, also rose, though by a more modest 0.3%.

The May payrolls report confounded economists who had predicted a job loss of 8 million in May as the coronavirus kept parts of the U.S. economy closed for a third straight month.

The report also jarred with separate data released a day earlier by the Labor Department, which said it received weekly unemployment claims for the first time from 1.9 million Americans, bringing to nearly 43 million the number receiving jobless insurance since the Covid-19 hit home in March. Gold prices jumped 1% on Thursday, reacting to the jobless claims numbers.

U.S. gold for August delivery settled down $44.40, or 2.6%, at $1,683 per ounce on New York’s Comex. It was the sharpest one day for Comex gold in nine weeks. For the current week itself, August gold lost 2.5%.

Spot gold, which tracks real-time trades in bullion, fell by $32.47, or 1.9%, to $1,681.68 by 2:55 PM ET (19:55 GMT).

“Gold traders rushed for the exits after they were stunned by the robust nonfarm payroll report,” said Ed Moya, analyst at New York’s OANDA.  “It will be hard for the Fed to remain extremely accommodative if the world’s largest economy is already in recovery mode.”

The Federal Reserve, the U.S. Treasury and Congress have jointly approved and disbursed trillions of dollars in loans, grants and outright aid to businesses and individuals in recent months because of the Covid-19-triggered economic downturn.

Some analysts, however, remained optimistic that gold would regain some upward momentum in the near-term despite the risk rally in stocks.

“I expect a return by next week to the basics of global economic recovery, before more headlines on Middle East worries, China-U.S. tariffs, debt and creeping — not negative interest rates — give gold a leg up,” said George Gero, managing director in charge of the precious metals portfolio at RBC Wealth Management in New York.

Moya concurred with that view.

“Gold might not get much more support from the Fed, but geopolitical risks, second wave concerns, and an eventually weaker U.S. dollar should keep the longer-term bullish outlook intact,” he said.

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