Appetite for assets perceived as risky also got a fillip amid some signs of softening trade tensions between the U.S. and China, drawing investor attention away from gold.
The U.S. garnered a better-than-expected 312,000 new jobs in December to bring total employment gains in 2018 to a three-year high of 2.64 million, with unemployment rising to 3.9% as labor participation rose. Economists polled by MarketWatch had expected a gain of 182,000 nonfarm jobs.
February gold on Comex GCG9, -0.75% lost $13.10, or 1%, to $1,281.70 an ounce, after the commodity closed 0.8% higher in the prior session to notch a more than six-month high. Tracking the most-active contracts, prices haven’t posted a daily dollar or percentage that big since Nov. 9, according to FactSet data.
For the week, gold futures was down about 0.2%, following gains in each of the last two weeks.
March silver SIH9, -0.14% was also down 10.7 cents, or 0.7%, lower at $15.695 an ounce, with prices up about 1.8% for the week.
“The U.S. dollar is firmer and equities are up along with Treasury yields — all headwinds for gold,” said Michael Armbruster, managing partner at Altavest.
The employment report may solidify the view that the economy is healthy but may also raise the question of how the data influences the Federal Reserve’s rate-hike strategy in the coming months. Higher rates can dull appetite for gold but the threat of rate increases also have roiled risk assets like stocks.
Friday’s jobs report lifted the U.S. dollar, with a measure of the buck, the ICE U.S. Dollar DXY, -0.08% up 0.3% at 96.567, and the Dow Jones Industrial AverageDJIA, +3.41% and the S&P 500 index SPX, +3.44% were holding on to strong gains following the report.
In a panel discussion alongside predecessors Janet Yellen and Ben Bernanke at an event in Atlanta, Federal Reserve Jerome Powell said the central bank will be “patient” to see how the economy evolves given conflicting signals from the market and economic data. He also said markets are pricing in downside risks and are “well ahead of the data.”
Armbruster believes that the Fed will end up leaving interest rates unchanged in 2019. “Barring a spike in inflation, if rates are left unchanged in 2019, it is likely that we have seen the last rate hike until after the 2020 presidential election,” he said.
“A one day setback for gold does not change the bullish technical outlook. In fact, we would view a further pullback in gold as a buying opportunity,” he added.
Before the employment report, optimism over fresh developments in trade negotiations between China and the U.S. helped to provide a lift to assets perceived as risky and dulled demand for bullion.
China’s Commerce Ministry confirmed that a delegation of U.S. officials will travel to Beijing for a new round of trade talks on Monday and Tuesday, according to news reports.
Despite the pitch lower for gold, some strategists that the metal’s early response would hold over the long-term and still view gold as maintaining a bullish tone amid uncertainty about central bank policy that has fostered volatility in the broader market.
“The jobs number obviously is strong but…I really don’t think there’s that much of a connection with it and gold and would suggest that gold will get through this knee-jerk reaction and resume its trend upwards,” said Trey Reik, senior portfolio manager at Sprott Asset Management.
He said gold is “clearly breaking out from a multiyear downtrend.”
Among other metals, palladium futures climbed, looking set to top the record settlement of $1,201.30 for a most-active contract reached on Dec. 19. March palladium PAH9, +3.09% added 0.8% to $1,209.30 an ounce.
Platinum and palladium “held up rather impressively [Thursday] in the face of several negative physical demand headlines,” analysts at Zaner Precious Metals said in a daily note Friday. “In addition to the largest monthly decline in the U.S. ISM manufacturing index since the Lehman crisis, the markets were also presented with a downtick in U.S. December auto sales and a number of downgrades for the Chinese economy.”
Despite the recent data, “the palladium chart remains positive with a pattern of higher highs seen in six out of the last seven trading sessions,” they said.
Among exchange-traded funds, the SPDR Gold Shares GLD, -0.83% was down 1.4%, the iShares Silver Trust SLV, +0.00% was down 0.8%, and the miner-oriented VanEck Vectors Gold Miners ETF GDX, -0.95% was off 1.2%.
The SPDR Gold Shares (GLD) was trading at $121.42 per share on Friday afternoon, down $1.01 (-0.82%). Year-to-date, GLD has declined -1.80%, versus a -5.07% rise in the benchmark S&P 500 index during the same period.
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