Gold trims gain after U.S. hiring data seen keeping Fed on rate-hike path

Published: May 5, 2017 9:36 a.m. ET

Iron-ore tumbles 7% as commodities come under heavy pressure

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Gold has a tough week.

Gold futures on Friday pared gains but remained in positive territory after April’s strong jobs report was seen keeping the Federal Reserve on a path of higher interest rates, with another hike increasingly likely as soon as next month.

“This [jobs] report falls into the camp of the U.S. monetary policy hawks, who want to see U.S. interest rates rise at a faster pace,” said Jim Wyckoff, senior metals analyst at Kitco.

June gold GCM7, -0.02% gained $1.60, or 0.1%, at $1,230.20 an ounce, after finishing the previous session at its lowest level in seven weeks. Gold had touched $1,236 earlier Friday. The metal’s sister commodity, silver for July delivery SIN7, -0.02% gained 3 cents, 0.2%, to $16.335 an ounce, bouncing off its lowest settlement of 2017 on Thursday.

For the week, gold prices are off 3.1%, representing its steepest weekly fall since the period ended Nov. 11, according to FactSet data, while silver is staring down a 5.2% slide, marking its worst weekly decline since the week ended Oct. 7.

Government data showed that some 211,000 people found new jobs in April as hiring rebounded from a wobbly showing in early spring. The unemployment rate, meanwhile, dipped to 4.4% from 4.5% to set a postrecession low.

Labor-market data are significant for gold traders because it is one of the economic reports closely followed by the Fed as the central bank determines the pace of its monetary-policy-normalization initiative. The Fed is expected to lift rates two additional times in 2017 and its policy update released on Wednesday helped to affirm that expectation.

Higher rates tend to be bullish for the dollar and bearish for commodities pegged to the currency, making them more expensive to buyers using other currencies. Expectations for an increase in interest rates also diminish the appeal of owning precious metals that don’t bear interest.

The ICE U.S. Dollar Index DXY, -0.09% which measures the dollar against a basket of six currencies, was slightly higher, up 0.1% at 98.83 in the wake of the report.

Traders saw little sign of an immediate inflation danger within the report’s wage details. Inflation risks could help gold, which is used as a hedge against rising prices.

“Technically, June gold futures bears have the overall near-term technical advantage. Prices are in a three-week-old downtrend on the daily bar chart,” said Wyckoff. “Bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at this week’s high of $1,272.40. Bears’ next near-term downside price breakout objective is closing prices below solid technical support at $1,200.00.”

Commodities slump

More broadly, the commodity complex, including base metals, like iron ore, and crude-oil prices CLM7, +0.86% have been under heavy selling pressure in recent trade, amid renewed concerns about the heath of China, the world’s second largest economy.

Iron-ore prices fell 7.5% Friday in Asian trade, following Thursday’s 8% tumble, pushing the base metal to its lowest level since November. High-grade cooper prices for July delivery HGN7, +0.12% were trading flat at $2.514 a pound, but is off 3.6% for the week. Both metals are considered important for construction and are viewed as a gauge of global economic vigor.

“Whether or not this is merely an oversold bounce for crude oil and the metals remains to be seen,” said Fawad Razaqzada, market analyst at

July platinum PLN7, +0.39%  traded $6, or 0.7%, higher at $913.88 an ounce, while June palladium PAN7, +0.00%gained $8.25, or 1%, at $809 an ounce.

In exchange-traded funds, the SPDR Gold Trust was up 0.5%, the VanEck Vectors Gold Miners GDX, +1.00%  was 1% higher, while the iShares Silver Trust SLV, -0.20% was trading 0.7% higher.