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How US Labor Data Affected Precious Metals

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Aug. 9 2016, Updated 2:12 p.m. ET

Employment data

The US economic data that came out on Friday, August 5, 2016, brought down the precious metals significantly. Investors had their eyes glued to the employment figures, which gave further clues about the economic performance of the country.

The US average hourly earnings, which measures the change in the price businesses pay for labor, excluding the farming industry, stood at 0.3%, higher than the forecasted figure of 0.2%. Plus, the non-farm employment change, which measures the change in the number of employed people during the previous month, excluding the farming industry, also rose to 255,000, much higher than the expectation of 180,000. The report marked the second straight healthy jobs reading in a row after a report for May showed that just 11,000 jobs were created. Such positive numbers increase the chance that the economy will improve, which weighed on the demand for safe-haven assets.

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Economic recovery

The unemployment rate was however marginally higher than the expectation of 4.8%. Its figure stood at 4.9%. The higher the unemployment rate in a country, the worse the labor conditions. However, the above two numbers pointed towards a better-performing labor market. This buoyed expectations of economic recovery. The numbers were excessively bearish for the precious metals, which were slowly trending higher during the past one week.

The reason behind the rise in the precious metals over the past one week was added pessimism from the US economy’s underperformance, and thus, the possibly delayed interest rate hike by the Federal Reserve.

Precious metals fell on Friday. As a result, the precious-metal-based funds like the Physical Swiss Gold Shares (SGOL) and the Physical Silver Shares ETF (SIVR) also fell. These two funds dropped 1.8% and 3.3%, respectively, on Friday.

In our next article, we will discuss the link between the US Fed interest rates and the precious metals.

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