(Kitco News) – In a delayed reaction, gold is losing ground as investors continue to digest the latest U.S. employment data. While the labor market remains relatively stable and job growth exceeded expectations, gold prices have begun to retreat.
The Bureau of Labor Statistics reported Friday that U.S. nonfarm payrolls rose by 139,000 in May, surpassing consensus forecasts. Economists had expected job gains of around 126,000.
“Employment continued to trend up in health care, leisure and hospitality, and social assistance. Federal government continued to lose jobs,” the report stated.
Meanwhile, the unemployment rate held steady at 4.2%, matching economists’ expectations.
However, the report also signaled slowing momentum. Figures for the previous two months were revised downward: April’s job gains were cut to 147,000 from an initial estimate of 177,000, while March’s total was lowered to 120,000 from 185,000.
“With these revisions, employment in March and April combined is 95,000 lower than previously reported,” the report noted.
Initially, the mixed employment data had a neutral impact on gold prices. However, growing sentiment that the Federal Reserve will remain on hold due to steady wage growth and stubborn inflation is now weighing on the precious metal. Prices have fallen below initial support at $3,350 an ounce. As of 10:55 a.m. ET, spot gold was trading at $3,325.39 an ounce, down 0.78% on the day.
On a more positive note for workers, wages continue to climb. Average hourly earnings rose 0.4%, or 15 cents, last month to $36.24—beating expectations for a 0.3% increase. Over the past 12 months, wages have increased by 3.9%.
While higher wages are welcome news for workers, some economists caution they may also stoke inflation, complicating the Fed’s already delicate balancing act.
Though the labor market shows signs of cooling, economists agree that there is still no urgency for the Fed to cut interest rates. The central bank has made clear that it is in no rush to ease monetary policy as inflation remains elevated and the job market shows resilience.
“The Fed should be reluctant to cut rates because the full effects of tariffs haven’t impacted inflation numbers yet, and the job market isn’t deteriorating enough to force their hand—which is why we don’t expect them to cut rates until the end of this year, if at all,” said Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management.
Meanwhile, gold remains volatile as investors respond to the Fed’s neutral policy stance. Analysts are divided: some warn that persistently high interest rates could tip the U.S. economy into recession, boosting gold’s appeal as a safe-haven asset. Others argue that lower rates would reduce the opportunity cost of holding gold, making it more attractive. However, any move toward rate cuts could also spur economic growth and redirect capital into equities.
In the current environment, commodity analysts expect gold prices to continue consolidating at elevated levels while awaiting fresh economic signals.
Michael Brown, Senior Research Strategist at Pepperstone, described gold as “pretty directionless” following what he called a “Goldilocks” employment report—“not too hot, not too cold.”
Bill Adams, Chief Economist at Comerica Bank, noted that while the headline job numbers suggest stability, underlying details were more troubling.
He pointed out that the unemployment rate held steady only because the labor force participation rate declined.
“If the labor force had held steady from April, the unemployment rate would have jumped to 4.6%, not remained at 4.2%,” he said.
Still, Adams does not expect the Fed to cut rates before summer.
“The Fed won’t be happy to see deterioration around the edges of the jobs report, but they are also worried about big input cost increases reported in business surveys, which are likely to show up as higher consumer inflation in the second half of the year,” he said. “Pulled in opposite directions by their mandate for stable prices and maximum employment, the Fed is likely to hold interest rates steady for at least the next couple of meetings.”
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press.
Shared by Golden State Mint on GoldenStateMint.com
