Gold prices rise after another disappointing jobs report, 194,000 jobs created in September

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(Kitco News) – Gold prices rise as the US labor market showed further weakness as fewer Americans found jobs in September, potentially putting the brakes on the Federal Reserve’s plan to change its monetary policy before the end of the year.

On Friday, the Bureau of Labor Statistics said 194,000 jobs were created last month. Economists expected to see job gains of around 490,000. This is the second month in a row that jobs fell short of expectations.

The gold market was in positive territory ahead of the data and added to its gains. December gold futures last traded at $ 1,700.00 an ounce, up 0.61% on the day.

Although the number of titles was significantly lower than expected, the report noted some positive trends. The unemployment rate fell to 4.8% in September from 5.2% in August. Economists expected the unemployment rate to fall to 5.1%.

The disappointing employment figures for August have also been revised upwards. The report says August’s employment figures have been revised to 366,000, an increase of 131,000 from the original estimate. Data for July has also been revised up to 1.091 million, up from the previous estimate of 1.053 million.

Positive for the gold market, wage inflation continues to accelerate. The report says wages in September rose 19 cents or 0.6%, up from the 0.6% increase in August.

“Data from recent months suggests that growing demand for labor associated with the recovery from the pandemic may have put upward pressure on wages. recent trends in average hourly earnings, ”the report says.

Economists will now wonder whether or not the latest jobs data changes the Federal Reserve’s plans to cut monthly bond purchases before the end of the year.

The US central bank has said that a healthy labor market is a key goal in determining the course of monetary policy.

Katherine Judge, senior economist at CIBC, said the Fed could still be on the verge of cutting back on its monthly bond purchases.

“Overall, this report suggests that there is enough momentum in the private sector for a QE cut to be announced again at the November FOMC,” she said.

Andrew Hunter, senior US economist at Capital Economics, said September’s jobs report is probably “decent” enough for the Fed to start cutting its bond purchases before the end of the year.

However, he noted that the data is not strong enough to justify a rate hike anytime soon. He also warned that inflationary pressure would be much higher than currently projected by the central bank.

“Along with signs that activity growth is slowing sharply, as worsening labor shortages put upward pressure on wage growth, this should leave Fed officials in dire straits. awkward position over the next few months, ”he said.

While tapering is still on the table, commodities analysts at TD Securities said gold could see some short cover as investors begin to assess the inevitable change in monetary policy from the Fed to the to come up.

Looking at US monetary policy, analysts said there are many reasons for holding gold.

“Beyond Fed prices, higher wages and no increase in the participation rate will keep the stagflation theme alive, and gold could be an ideal hedge against these growing stagflationary winds,” analysts said. . “As the global energy crisis intensifies, affecting the production of goods across the world and supply chains in Europe and Asia, the reasons for owning the yellow metal are becoming more and more compelling. ”