Gold Prices Under Pressure As U.S. Economy Creates 250K Jobs In October
(Kitco News)- The gold market is seeing a little selling pressurefollowing stronger than expected U.S. employment data.
The Bureau of Labor Statistics said 250,000 jobs werecreated in October, economists were expecting to see job gains of around 194,000.
At the same time the unemployment rate was unchanged at 3.7%,in line with expectations. The unemployment rate is at its lowest level since 1969.
Gold prices were slightly down ahead of the report andremains under pressure in initial reaction; December gold futures last tradedat $1,234.40, down 0.37% on the day.
Positive for gold, the report highlighted strong wageinflation. Average hourly wages increased by 5 cents or 0.2% to $27.30. For theyear inflation rose 3.1%, its biggest increase in nine years.
Commodity analysts have said that rising wage inflationcould be the critical component of the U.S. economy that will drive gold priceshigher. Analysts have noted that higher inflation will keep real interest rateslow, which lowers gold's opportunity costs as a non-yielding asset.
However, inflation is a more long-term factor and some economists have noted that the latest employment data should support the U.S. dollar in the near-term, which will weigh on the yellow metal.
"Wage inflation may still be a little slower than policymakers would likeand expect given how low unemployment is, but it has been on an uptrend sincethe start of the year," said Andrew Grantham, senior economist at CIBC World Markets. "Overall, a higher than expected gain in jobs and annual wage increaseabove 3% should be positive for the [U.S dollar] and negative for fixed income."
Paul Ashworth, chief U.S. economist, said that the strong employment report supports a December interest rate hike.
By Neils ChristensenFor Kitco News
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