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Gold Slumps on US Jobs Report, Still Poised for Tiny Weekly Gain

July 6, 2018 at 14:30 by Andrew Moran

The 2018 decimation continues as gold futures are trading lower on the final trading session of the week. The yellow metal is taking a hit on a positive US jobs report, which is raising expectations that the Federal Reserve could raise interest rates two more times in 2018. Any losses were capped by a lower US dollar.

August gold futures tumbled $2.40, or 0.19%, to $1,256.40 per ounce at 14:08 GMT on Friday. Gold prices, hovering around seven-month lows, are on track for a tiny weekly gain of about 0.20%. The yellow metal was unable to take advantage of its post-holiday gains as it is down more than 6% over the last three months.

Silver, the sister commodity to gold, is also sliding to finish the trading week. September silver futures slipped $0.067, or 0.42%, to $16.03 an ounce. The white metal will post a weekly decline of 0.84%.

According to the Bureau of Labor Statistics (BLS), the US economy added 213,000 new jobs in June, but the unemployment rate unexpectedly jumped to 4%, from an 18-year low of 3.8% in May. Hourly wages climbed five cents to $26.98 as the annual rate of pay increases was unchanged at 2.7%.

Surprisingly, the US dollar could not rally on the news, plunging 0.45% to 93.98. A weaker greenback is good for dollar-pegged commodities because it makes it cheaper for foreign investors to purchase.

The latest data could give the US central bank some ammunition to pull the trigger on two more rate hikes this year. This is something that Fed Chair Jerome Powell and the Federal Open Market Committee (FOMC) did hint at during last month’s policy meeting. Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost, but metals could rally on rising inflation levels.

On Friday, the US government officially slapped tariffs on $34 billion of Chinese goods, while Beijing retaliated with tit-for-tat levies on the same value of US goods. The administration has already warned that it is looking for other goods to target, leading China to promise retaliation. Canada, meanwhile, has already instituted tariffs on $16.6 billion worth of US imports, and the European Union is still “finalizing” its list of import taxes.

It is mixed in other metals markets on Friday. September copper futures dipped $0.02, or 0.85%, to $2.802 a pound. September platinum futures tacked on $1.80, or 0.21%, to $843.20 per ounce. September palladium futures were relatively flat at $943.00 an ounce.

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