Commodity Blog

Gold futures slightly fell during the early part of Friday’s trading session as the US government reported a lower-than-expected increase in jobs last month. The yellow metal has enjoyed enormous gains since the beginning of August, but it has shed about 1% since returning from the Labor Day long weekend. With the Federal Reserve expected to cut interest rates for the second time later this month and US-China trade talks starting up again, is gold’s meteoric rise coming to a crashing halt?

December gold futures dipped just $3.10, or 0.23%, to $1,522.90 at 12:30 GMT on Friday on the Comex division of the New York Mercantile Exchange. Year-to-date, gold is up 18% as it has taken advantage of all the global economic uncertainty brought on by trade wars and monetary easing.

Silver, the sister commodity to gold, is also dropping to end the holiday-shortened trading week. December silver futures fell $0.09, or 0.49%, to $18.705. The white metal is poised for a weekly loss of more than 1.3%, but it has still risen 17% so far this year.

According to the Bureau of Labor Statistics (BLS), the US economy created 130,000 jobs in August, down from the 159,000 gain in July. It is also much lower than the median estimate of 151,000. The unemployment rate remained unchanged at 3.7%. Average weekly hours rose 0.1 to 34.4 hours, the average wage paid to Americans climbed $0.11, or 0.4%, to $28.11 per hour, and the labor force participation rate jumped 0.2% to 63.2%.

The US government also revised its increase in new jobs for July from 164,000 to 159,000 and for June from 193,000 to 178,000.

Investors will now look ahead to next week’s consumer inflation expectations and business confidence.

Earlier this week, global financial markets rejoiced by the news that American and Chinese trade representatives will return to the negotiating table to discuss trade. Reports have suggested that this round of talks could lead to a major “breakthrough,” signaling that Beijing cannot hold out any longer as its economy continues to spiral out of control.

President Donald Trump also commented on the trade dispute, tweeting that the stock market would be 10,000 points higher if it were not for the US-China tensions. The Dow Jones Industrial Average is up 14.5% YTD, so it would be interesting to see just how high it would have been if it were not for the trade spat.

The disappointing jobs report is likely to give the Federal Reserve some additional ammunition to cut interest rates. According to the CME Group FedWatch tool, the market is widely anticipating a rate cut. This would bring down the target range from 2.00% to 2.25% to 1.75% to 2.00%.

The US dollar is also hurting precious metals as the greenback edged up 0.09% to 98.50, from an opening of 98.41. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

In other metal markets, October copper futures dipped $0.015, or 0.62%, to $2.625. November platinum futures crashed $32.34, or 3.34%, to $931.50. October palladium futures cratered $41.00, or 2.57%, to $1,521.00.

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