Gold futures settled lower Friday, giving up earlier gains to post a loss for the week, after Federal Reserve Chairman Jerome Powell offered an upbeat view on the U.S. economy, dulling demand for the haven metal.
Prices had been trading higher before Powell spoke on Friday, finding support after a report on the health of the U.S. labor market came in softer than expected.
The U.S. created a lackluster 130,000 new jobs in August, adding to evidence that hiring has slowed sharply in 2019. The increase in new jobs fell well short of the 170,000 MarketWatch forecast.
In a speech Friday, however, Powell said the job report is a sign of continued strength in the labor market. He also said the outlook for the economy remains favorable and the Federal Reserve is “not forecasting or expecting a recession.”
December gold fell $10, or 0.7%, to settle at $1,515.50 an ounce on Comex, after trading as high as $1,536.20. For the week, the most-active contract fell about 0.9%, according to FactSet data.
Bullion fell 2.2% on Thursday to settle at a two-week low, marking their biggest single-session percentage decline since June 15, 2018, and largest daily dollar loss since Nov. 11, 2016, according to Dow Jones Market Data.
MarketWatch columnist Mark Hulbert declared Thursday’s slide the beginning of a steeper retreat for gold.
Meanwhile, December silver settled lower, losing 68.8 cents, or 3.7%, to $18.119 an ounce, turning lower by 1.2% for the week. That follows a 3.8% tumble Thursday for gold’s sister metal, marking the most-active contract’s largest one-day dollar and percentage decline in more than a year.
Upbeat reports on Thursday, including one on private-sector payrolls from Automatic Data Processing Inc., and data from ISM, which saw its index of activity in the services sector indicate accelerating growth, helped to drive investors away from assets considered havens, including bonds and gold, and toward riskier assets like stocks.
However, the jobs report helps to support the case for a rate cut by the Fed at the conclusion of its two-day policy meeting on Sept. 18, market participants said.
The report “should not set off alarm bells but is not encouraging. It’s clearly on the negative side,” said Luke Tilley, chief economist at Wilmington Trust, in emailed comments. The Fed is “more likely now, than before the report, to ease [interest rates] again at the upcoming meeting” later this month. Precious metals tend to draw buying in a low interest-rate climate.
Against the backdrop of growing fears of a recession inside and outside the U.S., gold has prospered, up more than 18% so far this year, despite Thursday’s decline. By comparison, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.36% has climbed roughly 15%, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.45% has advanced 19%.
Bullish traders say that fears of a market-disruptive exit by Britain from the European Union and the unresolved China-U.S. trade spat also remain key drivers for bullion.
However, some investors argue that the rally has gotten ahead of itself, drawing investors that have been zealously purchasing gold in the face of some $17 trillion in government debt that yields less than 0%. Gold benefits from lower interest rates because it doesn’t bear a yield.
Fawad Razaqzada, technical analyst at Forex.com, said “after a 4-month rally, the precious metal looks technically overbought anyway and so a correction of some sort could be due.”
Among other metals, December copper lost 0.3% to $2.634 a pound, ending the week 3.2% higher. October platinum lost 0.5% to $958.50 an ounce, for a weekly rise of 2.9%, and December palladium shed 1.1% to $1,544.70 an ounce, settling 0.4% higher on the week.
The SPDR Gold Shares exchange-traded fund /zigman2/quotes/200593176/composite GLD +0.22% was down 0.5%, on track for a weekly loss of 0.9%.