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Gold Poised for Weekly Gain amid Strong Jobs Report

January 6, 2017 at 18:29 by Andrew Moran

Gold tumbled on Friday following the strong December jobs report, but that is not stopping the yellow metal from posting a weekly gain. With gold prices trading near a one-month high, the precious metal is poised for its best weekly gain in more than two months.

February gold futures declined $7.20, or 0.61%, to $1,174.10 per ounce at 17:01 GMT on Friday. This comes as gold settled at its highest level in five weeks on Thursday. Gold is on track for a 2.2% weekly gain as some traders do not believe the Federal Reserve will raise interest rates three times this year.

Silver is also taking a hit to close off the trading week. February silver futures fell $0.12, or 0.73%, to $16.51 an ounce. Silver is poised for a weekly gain of 2.9%.

Gold and silver traded lower on Friday due to the stellar employment numbers in December. According to the Department of Labor, the US economy added 156,000 jobs last month, though the creation is lower than the initial projections of 180,000. The unemployment rate rose from 4.6% to 4.7%.

The precious metals were also impacted by a strengthening US dollar. The greenback tacked on another 0.4% soon after the jobs report was released. The US dollar had an impeccable 2016 as it surged more than 3% to a 13-year high. A soaring dollar makes commodities like gold and silver more expensive for foreign investors to purchase.

Meanwhile, investors are returning to gold as a safe haven asset due to the political uncertainty in the US and Europe. This year, there will be elections happening in Germany, France, and The Netherlands, which could pose risks to the foundation of the eurozone. In the US, there is growing tensions between President-Elect Donald Trump and the intelligence community over Russia.

In addition, expectations that the US central bank will pull the trigger on three rate hikes have somewhat cooled down. Akin to previous years, unfolding global events could give Fed Chair Janet Yellen cold feet. Gold is sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets.

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