By Myra P. Saefong and Mark DeCambre
Gold futures ended lower on Friday, giving back earlier gains seen on the back of employment data from the Labor Department that revealed the U.S. economy created a lot less jobs than expected in September.
Prices for the precious metal earlier found support as the smaller-than-expected number of jobs created last month made it less likely that the Federal Reserve will decide to taper bond purchases soon.
The economy created only 194,000 new jobs in September to mark the second disappointing increase in a row. Economists polled by The Wall Street Journal had forecast 500,000 new jobs.
The nonfarm payrolls data “came back well below expectations…which suggests it may be harder for the Fed to taper than they would like,” Jason Teed, co-portfolio manager of the Gold Bullion Strategy Fund /zigman2/quotes/202310791/realtime QGLDX -0.09% told MarketWatch. “This in turn could be a tailwind for gold, as lower rates are supportive of the metal.”
Gold surged to session highs after the data, as the U.S. dollar weakened and real yields fell “deeper into negative territory,” said Edward Moya, senior market analyst at Oanda, in a market update.
However, after digesting the report, “gold investors quickly realized that the taper announcement is still happening in November and that pricing pressures are still elevated and that could still dictate higher interest rates next year.”
In Friday dealings, gold for December delivery /zigman2/quotes/210039437/delayed GCZ21 -0.02% /zigman2/quotes/210034565/delayed GC00 -0.02% fell $1.80, or 0.1%, to settle at $1,757.40 an ounce, with the most-active contract for the precious metal down just $1 from the week-ago finish at $1,758.40, FactSet data show.
Meanwhile, silver for December delivery /zigman2/quotes/210319421/delayed SIZ21 +0.16% /zigman2/quotes/210315219/delayed SI00 +0.16% added 5 cents, or 0.2%, to settle at $22.705 an ounce. For the week, gold’s sister metal saw a 0.7% rise.
Gold’s modest move for the week and silver’s advance came against the backdrop of U.S. Treasury yields rising to their highs not seen in months, while the dollar been modestly stronger.
A stronger dollar and rising yields ordinarily undercut buying in bullion because strength in the currency can make the asset comparatively more expense to overseas buyers and government debt competes with precious metals, which don’t offer a coupon, for safe-haven bids.
After the monthly U.S. employment data, Treasury yields strengthened, while the dollar, as gauged by the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY +0.19% was down less than 0.1%, poised for a weekly rise of about 0.1%.
The nonfarm payrolls data “made it clear that tapering isn’t necessary currently as the country’s labor market is still massively fragile,” said Naeem Aslam, chief market analyst at AvaTrade, in market update.
The “disappointing jobs number points toward a slowing economy but even worse, the report shows a declining participation rate and on top of that, companies are having to pay higher wages — this should increase investors fear of stagflation,” said Ken Ford, president of Warwick Valley Financial Advisors. “Gold is one of few assets that has glittered in past stagflation environments.”
He believes that recent criticism that gold has not been a good inflation hedge is “unfounded,” and that the precious metal has failed to gain respect even as gold prices have risen over 500% over the last 20 years and recently rallied close to 70% off its low set three years ago.
Ford said “the odds of the Fed raising interest rates above current inflation rates in the next year or two is about as good as winning the lottery.”
Other metals traded on Comex settled higher. December copper /zigman2/quotes/210059552/delayed HGZ21 +0.98% added nearly 0.8% to $4.276 a pound, ending 2.1% higher for the week.
January platinum /zigman2/quotes/222209103/delayed PLF22 +1.38% rose about 4.4% to $1,028.20 an ounce, for a weekly rise of 5.6%, while December palladium /zigman2/quotes/221433715/delayed PAZ21 -1.43% climbed by 6% to $2,073 an ounce, for a weekly rise of 8.9%.
The palladium market “sprang to life” on Thursday and added to that strength Friday, analysts at Zaner wrote in a daily report. Thursday’s strength was “likely from the sudden and dominating risk-on vibe flowing from equities,” with the strength in Friday dealings “possibly the result of a much stronger than expected Chinese Services PMI reading, which jumped deeper into the growth zone last month.”