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Gold Slightly Tumbles After Strong US Jobs Report

July 8, 2016 at 17:58 by Andrew Moran

After making considerable gains from the Brexit aftermath and a frightened Federal Reserve, gold prices have slightly tumbled following a positive US labor report. The increase in employment numbers may give the US central bank enough fuel to raise interest rates some point in 2016.

August gold futures fell a modest $1.95, or 0.14%, to $1,358.15 per ounce at 17:26 GMT on Friday. This comes one day after the yellow metal snapped a three-session win streak when it settled at just over $1,362 an ounce.

Gold had pared some of its losses after initially sinking $24 soon after the strong jobs report was released.

Meanwhile, September silver prices are up $0.24, or 1.20%, to $20.04 per ounce. Silver has been retreating as of late after recently crossing the $21 per ounce threshold, hitting a two-year high.

Gold and silver will finish the week 1% and 2% higher, respectively. Both precious metals will record their sixth consecutive week of gains. Year-to-date, gold has climbed 28%, while silver has soared 42%. The demand for gold remains high as about $4.1 billion was invested in funds that handle precious metals in the week that ended on Wednesday.

According to the Department of Labor, the US added 287,000 jobs in June, which beats the initial forecast of 170,000 jobs. It is also a lot higher than May’s tepid 38,000 jobs.

Despite the US central bank refraining from hiking interest rates, a stronger labor market may provide the Federal Open Market Committee (FOMC) and Fed Chair Janet Yellen enough confidence to present a rate hike after the summer.

Last month, according to minutes from the latest FOMC meeting, the Fed delayed a rate hike because of Brexit concerns and labor market worries.

Members generally agreed that, before assessing whether another step in removing monetary accommodation was warranted, it was prudent to wait for additional data on the consequences of the U.K. vote.

The CME Group FedWatch tool finds that there is a 6% chance of a rate hike in September. Gold loses its luster in a rising rate environment because dollar-denominated precious metals do not generate interest.

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