Gold rise slightly though U.S. jobs data supports rate hikes

Key Points
  • Gold prices rose on Friday after the U.S. jobs report showed the unemployment rate fell to 3.9 percent, an 18-year low.

Gold prices rose slightly in seesaw trade on Friday even as the U.S. dollar firmed after U.S. jobs data was weaker than expected, but still strong enough to support the case for more interest rate increases.

Spot gold was up 0.26 at $1,314.92 an ounce, heading for a third consecutive weekly decline, while U.S. gold futures for June delivery settled up $2 at $1,314.70. Spot gold prices are poised to end the week 0.6 percent lower.

The U.S. employment data showed U.S. job growth increased less than expected in April and the unemployment rate dropped to near a 17-1/2 year low of 3.9 percent.

"This is a bit disappointing on the earnings front after the employment cost index we received last week. Still this is not enough for the Fed to pause. They will still hike in the June meeting," said Collin Martin, fixed income strategist at the Schwab Center For Financial Research in New York.

The dollar index rose against a currency basket as investors bet that the Federal Reserve will continue raising rates while other central banks will act more slowly. A stronger dollar makes commodities priced in the greenback more expensive for buyers using other currencies.

"There's a little bit of a bottoming process happening (in gold)," said John Caruso, senior market strategist at RJO Futures in Chicago. "Yet gold prices straddled positive and negative territories."

"This back-and-forth movement could mean we're seeing a near-term shift in the direction of trade. The dollar is a little overextended in the near-term, but still a bullish trend," Caruso added.

Next week, gold is likely to remain supported as investors worry about a possible U.S. withdrawal from the Iran nuclear accord, said Commerzbank analyst Daniel Briesemann. If Washington decides to stick with the pact by a deadline of May 12, gold could be pressured, he added.

"Even if gold dips below $1,300, the past has shown that there is buying interest below that level, so we don't expect gold to drop significantly for the moment," Briesemann said.

Meanwhile, silver rose 0.55 percent to $16.50, ending the week barely changed.

Among platinum-group metals, mainly used for catalysts that clean pollution from car exhausts, platinum was up 0.9 percent at $907.60 and was on track for a third weekly fall to end the week about 0.3 percent lower. Palladium rose 0.26 percent to $964.50, heading for a nearly 1 percent weekly drop.

Gold bounces from 2018 low