The demand for gold remains low on Monday after prices dropped to a more than one-month low last Friday. The precious metal was affected by the report released by the U.S. Labor Department which showed unexpected employment growth in May. The jobs data boosted risk appetite and dampened the demand for the safe-haven metal.
Spot gold is currently trading at $1,693.80 an ounce as of 0943 GMT.
The report revealed that Non-farm payrolls increased by 2.509 million jobs in May after a record 20.7 million drop in April. Economists predicted a loss of 8 million jobs and an increase in the unemployment rate to 19.8%. The strong jobs data, which followed surveys showing stabilization of the services and manufacturing industries and an improvement in consumer confidence, amplified optimism about economic recovery from the COVID-19 pandemic.
However, despite signs of economic recovery, the effects of the pandemic can still be felt. There was a surge in COVID-19 cases in India and Brazil and the total number of global cases has reached more than 7 million. In China, imports dropped to a more than four-year low and exports contracted in May after a surprise gain in April. Also, the demonstrations for police reforms in the U.S. have kept risk sentiment in check.
AxiCorp’s chief market strategist Stephen Innes commented that the strong jobs data presents a variety of risks for the yellow metal. He said the bullion may struggle to get passed the $1,700 an ounce level again.
Meanwhile, the markets are waiting for the outcome of the two-day policy meeting of the U.S. Federal Reserve. But market participants have already stopped pricing based on the Fed’s possible adoption of negative rates.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world SPDR Gold Trust dropped by 0.4% last Friday to 1,128.11 tons. This reflects current investment sentiments. Also, the U.S. Commodity Futures Trading Commission reported that market speculators have cut their bullish stance in COMEX gold for the week which ended on June 2.