How US Employment Numbers Played Precious Metals This Week
US employment data
Gold prices dropped from its seven-week high level of $1,276.10 per ounce on Tuesday, August 1. Gold futures for September expiration fell 0.08% on August 2 and ended at $1,274.20 per ounce. Initially, gold prices were trading higher due to the weakness projected by the US employment numbers.
The ADP non-farm employment change, which measures the change in the number of employed people during the previous month, excluding the farming industry and government, was at 178,000, much lower than the analyst expectation of 187,000.
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A higher-than-expected number is beneficial for the growth prospects of the country, but a lower-than-expected figure harms the economic sentiment. The brighter the economic outlook, the lower is the need for haven assets like gold and other precious metals. However, the lower number makes these haven assets rise.
Influence on the Fed
Investors will also be closely looking at the more comprehensive US non-farm payrolls report, which was released on Friday, August 4. This report should provide a clearer picture of any action taken by the Federal Reserve.
Any decision by the Fed with respect to interest rates is strongly influenced by the economic figures that come out of the US. The Fed decisions further play a role on gold and silver. The variations in these indicators are also important for the gold- and silver-based funds like the iShares Gold Trust ETF (IAU) and the iShares Silver Trust ETF (SLV). These two funds have so far increased 9.8% and 3.7%, respectively, on a year-to-date basis.
In our next article, we’ll look at the close relationship between gold and interest rates.