Gold Market

The gold market in the United States is under a little selling pressure following the surprisingly strong employment data recently released in the states.

According to the Bureau of Labor Statistics, over 250,000 jobs found their way into the economy just last month. According to economists, the expected job growth should have been around 194,000. This unexpected growth of more than 50,000 jobs is, unfortunately, putting pressure on gold prices.

However, despite the new jobs now on the market, the unemployment rates have not changed as according to economist’s expectations. The percentage of unemployment is currently at its lowest since 1969.

Ahead of the report, the price of gold decreased slightly. The prices remain under pressure in the initial reaction. The December gold futures traded last at $1,234.40 down .37% that day.

In a positive light for the precious metal, the report highlighted strong inflation in wage. The average hourly wages went up by 5 cents (0.2% to $27.30.) The most substantial increase in nine years was the year inflation rose 3.1%.

The Balance Between the Gold Market and Jobs in the U.S.

Commodity analysts say that the rising wage inflation could be a crucial component of the United States economy to drive the price of gold ever higher. The analysts also noted that higher inflation keeps real interest rates low. This fact could then lower the opportunity costs for gold as a non-yielding asset.

Inflation, however, is more of a long-term factor. Some economists have seen that the most recent employment data should support the U.S. dollar in the near term. This, however, would negatively affect the price of the yellow metal.

Andrew  Grantham, the senior economist for CIBC World Markets, commented on this phenomenon. He says that wage inflation could be marginally slower than policymakers would like or expect. This fact is especially true given the low unemployment rate. However, it has been on an uptrend ever since the beginning of the year. Grantham continues by saying a higher percentage of gain in jobs and annual wage than expected, such as a wage increase over 3% should be an asset for the US dollar. However, it would also have a negative effect on fixed income.

Chief U.S. economist Paul Ashworth says the strong employment report does support an interest rate hike for December.