Gold futures gained, reducing a weekly decline, after U.S. employment data missed estimates, boosting the metal’s appeal as a haven.
Payrolls climbed by 151,000 last month following a 275,000 gain in July, a Labor Department report showed Friday in Washington. The median forecast in a Bloomberg survey called for 180,000.
Wall Street’s gold sentiment seems to have taken a 180-degree turn, with a majority of analysts now expecting prices to move higher next week after the release of data Friday showing U.S. employment grew less than expected.
Thirteen analysts and traders took part in the weekly Kitco News Wall Street survey, of which eight participants, or 62%, called for higher gold prices. Last week, nearly half of the experts surveyed were expecting lower gold prices. This week, only two voters, or 15%, are bearish, while three, or 23%, are neutral.
Meanwhile, 1,091 Main Street participants voted on this week’s online survey. A total of 626 respondents, or 57%, said they were bullish for the week ahead, while 311, or 29%, were bearish. The neutral votes totaled 154, or 14%.
Analysts are mostly bullish on the yellow metal as higher interest-rate expectations might have been a bit exaggerated prior to the jobs report. Following last week’s Fed comments, markets were considering the option that the central bank would hike rates this month; however, in the immediate aftermath of the weak employment data, the probability fell to 12% for September, from the prior day’s reading of 24%.
“Gold futures should continue to benefit after the miss on the jobs number on Friday,” noted Phil Streible, senior market strategist for RJO Futures. “The number a far cry from 180,000 expected, leaving the most likely scenario being one interest rate hike closer to the December meeting.”
Although the highly anticipated monthly U.S. jobs report might be out of the way, that doesn’t mean the gold market is completely done fretting over when to expect another rate hike by the Federal Reserve. Analysts say monetary policy will likely remain center stage in the run-up to the Sept. 20-21 meeting of Fed policyholders.
Gold was under pressure for much of this week as traders worried that a strong jobs report on Friday could prompt policymakers to hike as soon as this month, particularly after hawkish comments from Fed Chair Janet Yellen and Vice Chair Stanley Fischer a week ago. Instead, however, payrolls grew less than expected, and gold popped higher on Friday as rate-hike expectations were scaled back.
The U.S. economy created 151,000 jobs in August, while consensus forecasts were calling for at least 180,000 jobs to have been created. Markets were eying the data closely to see if the economic indicator would be enough to push the Federal Reserve into raising interest rates. However, given the lower-than-expected nonfarm payrolls print, markets are now pricing in a much lower chance of hikes. Based on CME's FedWatch Tool, markets have halved their expectations for September, now pricing in a 12% chance of a hike in September, down from 24% yesterday. For December, a majority in the marketplace continue to expect a rate hike – 51.2% see a move in December, down from yesterday's reading of 53.6% yesterday.
Reference: KITCO, Bloomberg
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