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Gold Rises on Disappointing US Jobs Report, Set for Weekly Gain

June 2, 2017 at 17:00 by Andrew Moran

Gold futures are rising on a weaker-than-expected US jobs May report. The yellow metal is on track for another weekly gain as some investors doubt the Federal Reserve will raise interest rates this month.

August gold futures climbed $8.90, or 0.70%, to $1,279.00 per ounce at 16:42 GMT on Friday. The last time gold prices settled at this level was at the end of April. Gold is poised to post its fourth straight weekly gain as the yellow metal is set for a 0.8% weekly advance.

Silver is also rallying to end the trading week. July silver futures rose $0.21, or 1.27%, to $17.50 an ounce. Gold’s sister commodity is on track to record a 1.1% weekly increase.

Investors are beginning to comb through the May jobs report. According to the Bureau of Labor Statistics (BLS), the US economy added just 138,000 jobs, lowering the unemployment rate to a 16-year low of 4.3%. The decline stems from more people leaving the labor market than a jump in the number of Americans who found a job – the labor force participation rate fell to a 40-year low of 62.7%.

This did not help the US dollar as the greenback slipped 0.45%. A weaker dollar is good for commodities like gold and silver because it makes it cheaper for foreign investors to purchase.

Analysts note that market expectations over future rate hikes have diminished – most still think the Fed will raise rates this month. According to the CME Group FedWatch tool, there is a 93% chance that the US central bank will raise rates at this month’s Federal Open Market Committee (FOMC) meeting. A third 2017 rate hike seems less likely, especially as the core PCE inflation measure hovers around 2% and President Donald Trump’s pro-business agenda remains uncertain.

Precious metals are generally sensitive to a rising-rate environment because it lifts the opportunity cost and sends traders into yield-bearing assets.

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