Futures & Commodities

Gold rises after weakest job report this year

Key Points
  • Spot gold could test support at $1,193 per ounce, according to a Reuters technical analyst.
  • Gold was on track to mark biggest weekly gain in six.

Gold prices rose on Friday following a monthly U.S. employment report falling to its lowest level in a year.

Spot gold rose 0.3 percent at $1,202.40 an ounce. It had gained 0.6 percent so far for the week, on track to mark its biggest weekly gain in six. U.S. gold futures were up 0.3 percent at $1,205.70 an ounce.

Nonfarm payrolls rose just 134,000, well below Refinitiv estimates of 185,000 and the worst performance since September 2017 when a labor strike weighed on the numbers. The unemployment rate fell two-tenths of a percentage point to 3.7 percent, the lowest since December 1969 and one-tenth of a percentage point below expectations.

August's initial count was revised up dramatically, from 201,000 to 270,000, while July's numbers came up as well, from 147,000 to 165,000. The revisions bring the three-month average growth to 190,000 while the 12-month average gain is 201,000.

Despite the weekly gain, gold prices have fallen more than 12 percent from a peak in April largely due to strength in the dollar, which has benefited from a vibrant U.S. economy, rising U.S. interest rates and fears of a global trade war.

"The fear is that the rising dollar is going to cause a huge rout in the emerging markets and investors want to hedge that risk," Think Markets UK chief markets analyst Naeem Aslam said.

Meanwhile, world markets steadied, as a four-year high in oil prices and the biggest weekly jump in Treasury yields since February left investors wondering where to go next.

Higher U.S. interest rates draw investors to the dollar, boosting its value and making assets priced in the U.S. unit, such as gold, more expensive for holders of other currencies.

Rising U.S. government bond yields typically weigh on precious metals, as they make Treasuries attractive to investors seeking assets that earn a return as opposed to gold, which earns nothing and costs money to store and insure.

"We expect that a topping out of U.S. real yields will begin to put a floor under gold prices starting in 2019," said Sabrin Chowdhury, commodities analyst at Fitch Solutions.

"Upward pressure on real yields will fade in the second half of 2019 and into 2020 due to slowing U.S. economic growth and rising inflation."

Among other precious metals, spot silver rose 0.6 percent to $14.64. Palladium fell 0.1 percent at $1,056.20, while platinum rose 0.3 percent at $820.50 an ounce.