Gold Falls 1.1% to $4,043.78 After U.S. Adds 165,000 Jobs
Key Facts
Spot gold fell 1.1% to $4,043.78 an ounce by 09:52 Eastern time on Nov. 6, while December futures dropped 1.5% to $4,052.30, after the U.S. economy added 165,000 nonfarm jobs in October. The increase exceeded EL7’s forecast of 65,000 jobs and the average monthly gain of 48,000 over the previous twelve months, according to the Bureau of Labor Statistics report. Gold reversed course after touching $4,100, according to an FX Empire report published the same day. The decline followed data that reinforced the picture of a stronger-than-expected labor market. The figures put the labor market among the indicators markets are tracking as they assess the path of U.S. interest rates.
The Bureau of Labor Statistics said the unemployment rate “changed little” at 4.1% in October, wording that points to limited change from the previous month. Job gains were concentrated in professional and business services, health care, and transportation and warehousing. The professional and business services sector alone added 70,000 jobs during the month. The jobs data, along with the unemployment rate, show that gains were not limited to one sector, though the sectors cited led the increase. Average hourly earnings for private-sector, nonfarm employees also rose 14 cents, or 0.4%, to $38.00. On an annual basis, average earnings increased 3.1% in the twelve months ended in October, according to the bureau.
The Bureau of Labor Statistics revised its estimates for the previous two months upward, raising August job growth from 133,000 to 186,000 and September’s from 29,000 to 60,000. As a result of the revisions, total jobs in the two months were 84,000 higher than previously reported. The revisions add to the strength of October’s reading when the three months are considered together, as the increase was not limited to the latest month’s data. Still, the average monthly gain over the previous twelve months remained 48,000 jobs, according to the report’s estimate. The gap between that average and October’s reading indicates that job creation during the month was far above the previous pace.
Inflation-protected Treasury yields had been elevated in the preceding days; the 10-year real yield was 2.64% and the five-year yield was 2.39% on Nov. 4, according to Federal Reserve data cited by FX Empire. These yields are a potential source of pressure on gold, which pays no interest, but the available figures do not establish that they caused its decline on Nov. 6. As for nominal bond yields, the 10-year U.S. Treasury yield was 4.84% on Nov. 5, compared with 4.90% on Nov. 4, according to the Treasury Department. In the monetary policy context, the Federal Reserve held its target rate range at 3.75% to 4% on Oct. 28. Two dissenting members supported a quarter-percentage-point rate increase.
In the Nov. 6 session, FX Empire reported spot gold at $4,046.13, down 0.48% at 15:32 GMT. That reading differed from prices recorded earlier in the session: a Reuters report published via Investing.com showed spot gold falling to $4,043.78 at 09:52 Eastern time. Despite the losses after the jobs report, gold remained on track for a weekly gain of more than 4% during the week of Nov. 2 to 6. The Reuters report linked the weekly performance to a decline in oil prices during the week. The weekly move offers broader context for the drop recorded after the employment data, without erasing the session’s losses.
Gold had risen 3.2% to $4,057.26 an ounce on Nov. 4, its biggest intraday gain since Aug. 19, amid a weaker dollar after the midterm election results, according to a Reuters report published via Investing.com. On inflation, the U.S. consumer price index rose 3.7% year over year in September, while the core index, which excludes food and energy, increased 2.6%; that reading was published on Oct. 14. These are actual September rates, not forecasts for an October reading. The Bureau of Labor Statistics scheduled the October consumer price index release for Nov. 10 at 8:30 a.m. Eastern time. The November jobs report is scheduled for Dec. 4 at 8:30 a.m. Eastern time.
The Federal Open Market Committee is scheduled to meet on Dec. 8 and 9, with a news conference on Dec. 9, according to the Federal Reserve’s calendar. After the jobs report on Nov. 6, markets priced in roughly a three-quarters chance of a rate increase in December, according to a Reuters report citing estimates from the CME FedWatch tool. LPL’s chief economist said the labor market gives the committee support for a rate increase in December. The meeting date puts the rate decision at the next milestone after the inflation and jobs data scheduled beforehand. These developments remain part of the backdrop for gold trading, with the metal ending the report’s session below $4,100.