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Gold Slips on Strong US Jobs, Wage Data

February 2, 2018 at 15:47 by Andrew Moran

Gold futures are sliding more than 1% at the end of the trading week on strong US jobs and wage data. With the US dollar and Treasury yields advancing, the yellow metal is on track for a weekly loss.

April gold futures tumbled $14.90, or 1.11%, to $1,333.00 per ounce at 14:29 GMT on Friday. Gold prices are poised for a weekly decline of 1.4%, slashing its year-to-date increase to just under 2%.

Silver, the sister commodity to gold, is also plummeting on the final trading session for the week. March silver futures fell $0.40, or 2.36%, to $16.75 an ounce. The white metal is getting ready for a weekly drop of 2.5%, and silver prices are down 1.4% year-to-date.

According to the Bureau of Labor Statistics (BLS), the US economy created 200,000 new jobs in January, while the unemployment rate stayed still at 4.1%, a 17-year low. The labor report showed that average hourly wages surged nine cents, or 0.3%, to $26.74, the best level since June 2009.

The news is helping push up the US dollar as the greenback soared 0.76% to above 89.0. A strengthening currency is bad for dollar-denominated commodities like gold and silver because it makes it more expensive for foreign investors to purchase.

Meanwhile, Treasury yields are rising to multi-year highs – the 10-year Treasury note’s yield lifted nearly 2%. Gold is generally sensitive to higher yields because bullion does not provide investors with yields.

Despite the US stock market taking a beating during the morning trading session, traders are betting that the Federal Reserve will raise interest rates at the Federal Open Market Committee (FOMC) meeting next month. According to the CME Group FedWatch tool, there is a 78% chance of a rate hike at the March 20–21 policy meeting.

Gold is usually affected in a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets.

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