Gold futures climbed on Friday, holding the bulk of their gains after U.S. jobs growth fell short of expectations, but prices ended a bit lower for the week a day after posting a more than seven week low.
November U.S. payrolls data showed a gain of 210,000 jobs, against expectations for a rise of 573,000 and a rise of 531,000 in October. The jobless rate, however, fell to 4.2% from 4.6% and touched a new pandemic low.
Overall, the data were mixed, said Chris Gaffney, president of World Markets at TIAA Bank. They have “something for everyone on the FOMC,” he said.
Slower job and wage growth support Federal Reserve Chairman Jerome Powell’s “view that more data is needed prior to a more aggressive rate hike policy, while the increased participation rate and a lower overall unemployment rate will support the hawks in their desire to increase the pace of the taper,” said Gaffney.
Powell revealed this week that the central bank believes it is time to start tapering faster.
Some 594,000 people rejoined the labor force in November, based on a separate survey of households, according to the data released Friday. The so-called rate of participation rose two ticks to 61.8% and reached the highest level since the start of the pandemic.
Chairman Powell and members of the FOMC have been “focusing on their mandate to reach ‘maximum employment’ and have been waiting for this participation rate to increase,” said Gaffney.
All in all, the mixed report “won’t necessarily do anything to change the overall direction of FOMC policy,” he said. “An acceleration of the pace of the taper is still on the table, but today’s report will also encourage members to ‘wait and see’ future reports before discussing an acceleration of the expected hikes of interest rates in 2022.”
A reading of the Institute for Supply Management’s services index Friday showed a rise to a higher-than-expected 69.1% in November, from 66.7% in October.
The most active February gold contract
rose 1.2%, or $21.20, to settle at $1,783.90 an ounce. For the week, gold prices based on the most-active contract traded nearly 0.1% lower, according to Dow Jones Market Data.
On Thursday, gold dropped 1.2% to finish at $1,762.70 an ounce on Comex, the lowest settlement for a most-active contract since Oct. 12.
meanwhile, edged up by 0.7% to $22.481 an ounce, for a weekly loss of 2.7%.
“Gold has not performed well this week, as we are concerned about the potential of deflation,” said James Hatzigiannis, chief market strategist at Ploutus Capital Advisors.
The Federal Reserve is set to be more aggressive and with inflation rising, that could “result in the central bank ending asset purchases sooner than we have expected for the next year,” he said. “That is why you have not seen that haven appeal gold typically shows.”
Investors continue to watch for updates on the omicron variant that was brought to the world’s attention late last week by South African scientists, and which has triggered days of market turmoil.
Gold has disappointed investors in recent days who were hoping the precious metal would draw haven bids and retake the psychologically important level of $1,800 an ounce.
Among other metals traded on Comex, March copper
slipped 0.7% to $4.267 a pound, leading prices down by 0.4% for the week.