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Gold Slumps on Impressive Jobs Report, Higher Wages

November 2, 2018 at 17:29 by Andrew Moran

Gold futures are slumping at the end of the trading week amid an impressive jobs report and higher wages. The yellow metal is also sliding on the likelihood that the Federal Reserve is guaranteed to raise interest rates at next month’s monetary policy meeting. Gold’s losses were capped on a new report that found strong global demand, particularly among central banks.

December gold futures tumbled $4.50, or 0.36%, to $1,233.90 per ounce at 16:04 GMT on Friday. Gold is on track for a flat week after recording a monthly gain in October. Year-to-date, gold prices are still down roughly 7%.

Silver, the sister commodity to gold, is on the cusp of finishing off the trading week in the red. December silver futures dipped $0.01, or 0.08%, to $14.76 an ounce. The white metal is poised for a modest weekly gain of 0.4%, but it is still down 15% so far in 2018. Silver edged up 0.5% in October.

According to the Bureau of Labor Statistics (BLS), the US economy added a stupendous 250,000 new jobs last month, beating market forecasts of about 208,000. This kept the unemployment rate at 3.7%, its lowest level in 48 years. The report also confirmed that wages over the past 12 months jumped from 2.8% to 3.1%, the fastest pace since the middle of 2009.

The biggest jobs gains were found in hospitality and leisure (42,000), healthcare (36,000), manufacturing (32,000), and construction (32,000). The retail and financial sectors only added 2,400 and 7,000 jobs, respectively.

The bullish labor report is adding to expectations that the central bank will pull the trigger on a December rate hike. According to the CME Group FedWatch tool, there is a 72% chance of a 25-basis point increase and a 5% chance of a 50-basis point hike. The current target rate stands at 2.00% to 2.25%.

Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets. But, since the market has anticipated a December rate hike for the last two months, it might already be penciled in the prices.

There seems to be growing demand for bullion again. Not only are investors slashing their net short positions in gold, central banks have increasing appetites for the yellow metal. The World Gold Council (WGC) reported that central banks have boosted their purchases in gold, but swelling supplies and weak investment flows might threaten the metals market.

The US dollar is also affecting gold as the greenback jumped 0.22% to 96.51. A stronger buck is bearish for dollar-pegged commodities because it makes it more expensive for foreign investors to purchase.

In other metal commodities, December copper futures soared $0.08, or 2.91%, to $2.80 per pound. December platinum futures spiked $12.90, or 1.5%, to $875.70 an ounce. December palladium futures surged $22.30, or 2.06%, to $1,103.70 per ounce.

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