Gold prices seeing some selling pressure after U.S. created 273K jobs in February

The article was updated to reflect a shift in gold prices in a delayed reaction to the employment data

In a delayed reaction, the gold market is losing some altitude, hit with some selling pressure as the U.S. labor market was stronger than expected last month.

Friday, The Bureau of Labor Statistics said 273,000 jobs were created in February; however, economists were expecting to see job gains of around 175,000.

At the same time, the unemployment rate came in at 3.5%, compared to January’s level at 3.6%; consensus forecasts were calling an unchanged reading.

The renewed selling pressure comes as gold prices see their best weekly gains since early 2009 as markets reacting to growing investor fears surrounding the spreading coronavirus. Gold prices have rallied sharply since Wednesday after the Federal Reserve announced an emergency rate cut of 50 basis-points because of worries that the virus will weigh on the U.S. economy.

Off their session highs, April gold futures last traded at $1,673.70 an ounce, up 0.34% on the day.

Not only did February see the most robust pace in job growth since May 2018, but previous months' data were also revised significantly higher. The report said that December employment data was revised up to 184,000 from the last reading of 147,000. Meanwhile, January’s data was revised up to 273,000 from the previous estimate of 225,000.

“After revisions, job gains have averaged 243,000 per month over the last 3 months,” the report said.

Although the latest labor market data was stronger than expected, many economists are dismissing the latest report as market sentiment is clearly focused on potential economic impacts the coronavirus will have.

“While these figures suggest that consumer fundamentals are solid heading into the covid-19 outbreak, the deterioration in consumer confidence is likely to translate into a deterioration in household spending, and the expected rise in the unemployment rate over the quarters ahead should be enough to see the Fed continue to cut rates,” said Katherine Judge, senior economist at CIBC.

While the headline employment data show robust growth, wages are still relatively muted by comparison. The report said that wages increased by 9 cents or 0.3% in February, in line with expectations. For the year, wages have increased by 3%. In January, annual wage growth was 3.1%.

source: www.kitco.com