Gold futures rose on Friday as US Treasury yields fell to their lowest level since September 23.
Traders said price action was likely fueled by positional adjustments in response to a disappointing figure in the November US Non-Farm Wage Report, fear of the unknown created by the variant of the Omicron coronavirus and the loss of riskier assets.
On Friday, February’s Comex gold stood at $ 1,783.90, up $ 21.20 or + 1.20%. The SPDR Gold Shares (GLD) ETF closed at $ 166.63, up $ 1.39 or + 0.84%.
Despite Friday’s strength, gold still finished lower for the third week in a row, down 0.4%, as Fed officials took a hawkish tone on reducing stimulus and rates of interest.
NFP report – Unemployment rate indicates tightening labor market
The gold price action suggests aggressive speculators took a bite out of the disappointing non-farm payroll figure, while ignoring the highest unemployment rate which plunged to its lowest level in 21 months.
The aggregate figure may have been enough to fuel the uptrend in the short term, but the decline in the unemployment rate indicates a decline in gold prices in the long term. In other words, there was nothing in the report to discourage the Fed from stepping up the pace of the cut and raising rates earlier than expected.
Job growth in the United States slowed significantly in November due to job losses at retailers and local public education, but the unemployment rate plunged to 4.2%, suggesting that the market of work was tightening rapidly.
The business survey showed that the non-farm payroll increased by 210,000 jobs, the least since last December. But the economy created 82,000 more jobs than initially announced in September and October, a sign of strength. This left employment 3.9 million jobs below the peak of February 2020.
The 10-year benchmark yield slips below 1.4% on the safe haven supply
U.S. Treasury yields fell in choppy trading on Friday, with the 10-year yield falling below 1.4% for the first time since September as sentiment of risk aversion took hold in markets, pushing down Wall Street and higher gold prices.
The benchmark 10-year rate fell to its lowest level since September 23 at 1.355%. Lower yields reduce the opportunity cost of holding bearish interest-free gold.
Report on US dollar capped by mixed jobs
The US dollar reversed its gains to trade little change in the aftermath of the release of a weaker-than-expected US employment report, which still included positive revisions for previous months and solid labor market details . The greenback ended the week broadly unchanged despite rallying last week at its highest level since July of last year.
Short term outlook
We could envision a choppy transaction until the Fed’s monetary policy meeting on December 14th and 15th. Range-related trading will likely be boosted by rising short-term yields, which tend to be bearish for gold, and falling long-term yields, which tend to support gold.
The hawkish comments by Fed Chairman Jerome Powell to Congress last Wednesday are encouraging sellers. Growing concerns about the Omicron variant are attracting buyers.