Gold Prices Turn Negative As U.S. Economy Adds 201k Jobs In August

(Kitco News) – Gold prices has given up some of its modest gains but continues to hover around the psychological level of $1,200 an ounce as the labor market added more jobs than expected last month and wages sharply increased.

The Bureau of Labor Statistics said 201,000 jobs were created in August; economists were expecting to see job gains of around 191,000.

While the August numbers were better than expected, the June and July reports were revised slightly lower. June’s employment data was revised to 208,000 jobs, down from the previous estimate of 248,000. Meanwhile, July’s data was revised down to 147,000 jobs from the initial estimate of 157,000.

“After revisions, job gains have averaged 185,000 per month over the last 3 months,” the report said.

At the same time the unemployment rate came in at 3.9%, unchanged from July’s level.

The gold market was holding on to modest gains ahead of the report, but has seen some selling pressure in initial reaction. December gold futures last traded at $1,202.80 an ounce, down .12% on the day.

Not only was headline data better than expected but the U.S. economy saw a sharp increase in average hourly wages, which is supporting the U.S. dollar, according to some market analysts.

“They are strong economic numbers that support the dollar and weaken gold temporarily,” George Gero, managing director with RBC Wealth Management.

Average hourly wages increased by 0.4% last month or 10 cents to $27.16. Annually, workers saw their wages increase by 2.9%. According to reports this is the strongest wage growth in nine years.

According to some economists the data will continue to support further rate hikes from the Federal Reserve.

“The standout figure was the 0.4% advance in average hourly earnings which takes the annual rate up to 2.9%, with both readings exceeding expectations by two ticks. That justifies another rate hike this month and suggests that underlying inflation may be picking up slightly,” said Katherine Judge, senior economist at CIBC World Markets. “However, we have seen wage growth pick up before, only to disappoint in later months and we are still not above the 3% pace that the Fed would like to see. Today’s report should still be marginally positive for the USD and see yields rise slightly.”

Andrew Hunter, U.S. economist at Capital Economics, also said that he is expecting to see further rate hikes, starting with one in two-weeks time.

By Neils Christensen
For Kitco News


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