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Weak Wage Data, Strong Demand Help Gold Post 2.5% Weekly Gain

February 3, 2017 at 18:07 by Andrew Moran

The volatility in the stock market for the last six trading sessions, slow wage growth, higher demand, and a weaker US dollar helped gold post another weekly gain for 2017. The latest jobs report, which highlighted disappointing wage growth, prompted traders to dive into the yellow metal in the final trading session of the week.

April gold futures rose a tepid $1.29, or 0.11%, to $1,220.79 per ounce at 16:40 GMT on Friday. The yellow metal pared most of its losses after reaching an intraday low of just under $1,208. Gold is poised to record a weekly gain of 2.5%, and it is the biggest weekly advance since mid-November. It is also the fourth time this year that gold has posted a weekly gain.

Silver is also posting modest gains on Friday. March silver futures jumped $0.04, or 0.24%, to $17.47 an ounce. Silver will also report a weekly gain of around 2%.

Gold and silver are rising based on new employment figures from the US Department of Labor. According to the January labor report, the US economy added 227,000 jobs, while the unemployment rose to 4.8%. But analysts were disappointed by the monthly wage growth of just 0.1%. Experts warn that this may give the Federal Reserve some pause before moving forward with hikes to interest rates.

Last month’s jobs reports made the greenback weaker and sent bond yields tumbling.

It remains unclear as to when the next rate hike by the US central bank will take place. This past week’s Federal Open Market Committee (FOMC) meeting did not give investors any hints as to when they would pull the trigger on a third rate hike in 11 years. Some experts expect a rate hike as early as March. Gold is sensitive to rising rates because it lifts the opportunity cost and sends traders into yield-bearing assets.

Meanwhile, the world’s appetite for gold remains fierce. According to the World Gold Council (WGC), global investment demand in 2016 spiked by 70% year-on-year to its highest level since 2012. WGC officials attributed the strong demand to upcoming rate hikes and the US election.

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