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Gold Crashes on Surprise May Jobs Report, Rising US Dollar

June 5, 2020 at 17:13 by Andrew Moran

Gold futures are poised to settle at their lowest levels in two months to finish the trading week. The yellow metal cratered below the $1,700 mark on Friday after the May jobs report beat all expectations, sparking a huge rally in the stock market and lifting the US dollar. Is the ride over for gold, or does the precious metal still have room for growth this year?

August gold futures plummeted $43.60, or 2.52%, to $1,683.80 per ounce at 16:59 GMT on Friday on the Comex division of the New York Mercantile Exchange. Gold prices have not traded at this level in about two months. The yellow metal is set for a 3.4% weekly loss, but it is still up 11% year-to-date.

Silver, the sister commodity to gold, is also slumping to end the trading week. July silver futures tumbled $0.556, or 3.08%, to $17.505 an ounce. The white metal will also suffer a 5.3% weekly loss, bringing its YTD decline to roughly 2.2%.

Metal commodities are taking a hit on a better-than-expected May jobs report. According to the Bureau of Labor Statistics (BLS), the US economy added 2.509 million new jobs last month, up from the 20.6 million lost jobs in April. The median estimate was eight million lost jobs in May. The unemployment rate slipped to 13.3%, down from 14.7% in the previous month. The market penciled in a reading of 19.8%. Nearly every private-sector industry recorded huge employment gains, led by leisure and hospitality (1.23 million). The government was the only sector that contracted, eliminating 585,000 positions.

Overall, the US job market had its best one-month increase since 1939.

The labor data sent equities soaring on Friday. The Dow Jones Industrial Average reclaimed 27,000, the S&P 500 hit 3,200, and the Nasdaq Composite Index reached another record high. The bond market witnessed a massive selloff as the benchmark 10-year Treasury note rose 0.107 basis points to 0.927%.

Despite sliding in the wake of the employment numbers, the greenback pared its losses. The US Dollar Index, which measures the buck against a basket of currencies, advanced 0.3% to just below 97. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

Is gold headed back down to earth? Some market watchers think gold prices will test $1,700 again because of geopolitical tensions, US-China trade strife, COVID-19, the US election, and Middle East woes.

In other metal markets, July copper futures soared $0.065, or 2.61%, to $2.5545 per pound. July platinum futures dropped $36.40, or 4.21%, to $828.60 per ounce. July palladium futures tacked on $27.10, or 1.41%, to $1,949.90 an ounce.

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