Gold prices rose anew on Monday after hitting near a three-month peak in the previous session. The worse-than-expected U.S. jobs data bolstered the demand for the yellow metal. It also reinforced hopes for a lower interest rate. The bullion was further supported by a weaker dollar, which plunged near a more than two-month low.
Another tailwind for the metal is the Federal Reserve’s pledge to keep interest rates until its employment and inflation rate targets are achieved. Lower interest rates weigh on the dollar and reduce the opportunity cost of owning gold.
Spot gold is currently trading at $1,835.39 per ounce as of 0816 GMT.
IG Market analyst Kyle Rodda commented that the U.S. employment data is practically the beginning and end of the story for gold. Given the metal’s upside momentum, he predicted that the next price level to watch for would be $1,850.
On Friday, the Labor Department reported that American employers added only 266,000 jobs in April. It is the weakest monthly since January and nowhere near the analysts’ forecast of one million jobs. The unemployment rate rose to 6.1% in April, which also missed analysts’ expectations of 5.8%. The revised employment figures for March were also trimmed down from 916,000 to 770,00.
Commerce Secretary Gina Raimondo commented that the lower-than-expected employment growth reflects the struggle of many Americans to return to work. It also indicates that the American economy has a long way to go to recover from the pandemic.
Many Republicans blame the administration’s generous unemployment benefits for the disappointing employment report. U.S. Representative Mo Brooks tweeted that the government pays people not to work so they don’t. Republican-led states South Carolina and Montana are considering ending Biden’s pandemic unemployment benefits.
But the Democrats blame companies for not offering high enough wages to encourage people to go back to work. And they are calling for a federal minimum wage hike and the passage of Biden’s American Jobs and Families Plans.
On the technical front, Reuters technical analyst Wang Tao predicted that spot gold may test a price resistance at $1,847 an ounce. If the bullion moves above that level, it could climb to $1,876.
In physical trading, gold demand in India is still affected by the surge in COVID-19 infections. Retail purchases fell to almost zero as jewelry stores were closed across the country. Dealers offered discounts of up to $3 per ounce. In China, gold premiums stayed flat because the nation was closed most of the week, but it was because of the observance of the Labor Day holidays.
In a related development, the U.S. Commodity Futures Trading Commission (CFTC) reported that market speculators raised their bullish stance in COMEX gold contracts for the week that ended on May 4. Also, the holdings of SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, increased by 0.6%. It reflects current market sentiment.