Spot gold fluctuated in a narrow range in the Asian session on Friday (June 7), currently trading around $2,378.64 an ounce. Gold prices climbed to a two-week high on Thursday, closing at $2,375.60 an ounce, as weaker-than-expected U.S. jobs data fueled hopes that the Federal Reserve would cut interest rates later this year, and the market focus turned to non-farm payrolls data released on Friday.
Data on Wednesday showed that U.S. private employment increased less than expected in May, while data for last month was revised down.
“The weaker ADP employment numbers on Wednesday gave the bulls a little confidence that maybe tomorrow’s (non-farm payrolls) report will not be stronger than expected, which will be good for the gold and silver markets,” said Jim Wyckoff, senior analyst at Kitco Metals.
Rate cuts reduce the opportunity cost of holding non-interest-bearing gold. A Reuters poll showed that most forecasters believe the Federal Reserve may cut its key interest rate in September and cut it again this year.
After Canada cut interest rates by 25 basis points on Wednesday, the European Central Bank also cut interest rates by 25 basis points on Thursday, providing support for gold prices.
Consulting firm Metals Focus said that despite the decline in physical demand, gold prices are expected to hit new highs this year.
In addition, Israel attacked a UN school in Gaza, killing dozens of people, and geopolitical concerns have re-heated, which also provided upward momentum for gold prices.
(Spot gold daily chart, source: Yihuitong)
The number of initial jobless claims in the United States increased last week, and the increase in labor costs in the first quarter was lower than initially estimated
In the week ending June 1, the number of initial claims for state unemployment benefits increased by ,000, to 229,000 after seasonal adjustments.
In the week ending May 25, the number of people continuing to receive unemployment benefits increased by 2,000, to 1.792 million after seasonal adjustments.
Data released by the U.S. Department of Labor on Thursday also showed that the growth of U.S. worker productivity in the first quarter was slightly lower than previously estimated.
The U.S. Commerce Department also reported that the U.S. trade deficit widened in April as a surge in imports overshadowed a small increase in exports, which may curb economic growth in the second quarter.
U.S. Treasury yields fall, eyes on Friday’s U.S. jobs report
ECB cuts rates for the first time in five years as expected
The European Central Bank cut rates for the first time since 2019 on Thursday, saying progress had been made in tackling inflation while acknowledging that the battle against inflation is far from over.
Israel attacked a UN school in Gaza, killing dozens of people
Market outlook
Investors braced for weak employment data on Friday, with job gains likely to fall short of the median economist forecast of 185,000. The April report showed job growth slowed more than expected, with 175,000 jobs added, the fewest in six months.
Wage data in Friday’s jobs report will be closely watched, with inflation remaining a focus of Fed policy.
Next week’s May Consumer Price Index (CPI) report will be key in guiding the Fed’s near-term expectations. Fed officials have stressed that they want to see several months of improving inflation before easing policy.
The consumer price inflation report will be released on Wednesday, before the Fed concludes a two-day policy meeting, where officials will release updated economic and interest rate forecasts.
From a technical perspective, gold prices have initially broken through the 2315-2365 area of the past two weeks. Before losing 2365, the short-term trend is to fluctuate upward and is expected to test the resistance near the 2400 mark.