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Gold Falls 1% As U.S. Economy Adds 255K Jobs In July

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Gold Falls 1% As U.S. Economy Adds 255K Jobs In July

By Kitco News

Friday August 05, 2016 08:31

 

(Kitco News) - The gold market is seeing strong selling pressure as the U.S. labor market continued to expand at bigger than expected pace.

The Bureau of Labor Statistics said 255,000 jobs were created in July, economists were expecting to see job gains of 180,000. At the same time the unemployment rate 4.9%, unchanged from June’s reading. Economists were expecting to see a drop to 4.8%. The participation rate was little changed at 62.8%.

In initial reaction, December gold futures dropped to $1,355.50 an ounce down almost 1% on the day.

Along with stronger than expected employment gains last month, May and June data was revised higher. May’s employment gains were revised to 24,000, from 11,000; June’s employment was revised to 292,000 from the initial report 287,000.

 

 

The report noted that the average job gains in the last three months has averaged 190,000.

Workers also so an increase in their paycheck last month, which increased 0.3% from June. The report said that the average hourly earnings increased to $25.69, up eight cents from the previous month. On the year wages have increased 2.6%.

Avery Shenfeld, senior economist at CIBC World Markets said that although the U.S. has struggled with anemic growth for the first half of the year, the fact companies continue to hire bodes well for future growth prospects.

“The US job market hasn't shown the same degree of disappointments as GDP over recent quarters, and that dichotomy continued with July registering another month of respectable hiring, and upside surprises across the board,” he said.

The gold market lost steam as the U.S. dollar gained strength on the back of increasing interest rate expectation. CME Group 30-Day Fed Fund futures are now pricing in an 18% chance of a rate hike in September, ahead of the report expectations were at 12%. November expectations increased to 19.3%, up from 13.6% ahead of the report.

By year-end markets are pricing in a 43% chance of at least a 25 basis point hike. Markets were pricing in only a 34% chance of a rate hike ahead of the report.