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Weaker Jobs Reports Raises Odds of Fed Rate Cuts, Gold Rises

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Jun. 7 2019, Published 12:46 p.m. ET

Gold catches a bid

Gold has caught a bid in the last few days after being lukewarm for most of this year. Weaker US economic reports and escalating trade tensions between the US and its biggest trading partners have upped the safe-haven metal’s appeal. Due to the soft economic growth, the odds of the Fed cutting rates have also increased, which is also positive for gold—as gold doesn’t yield regular income, lower interest rates increase its appeal.

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GLD and GDX

The SPDR Gold Trust ETF (GLD) and the VanEck Vectors Gold Miners ETF (GDX) had gained 3.8% and 8.4% this year as of yesterday, and 4.7% and 12.3% in the last ten trading days. Gold is trading near its highest level in the last three months on financial market fears, and the latest weak jobs report has only added to those fears. Hopes of the Fed cutting rates have been the largest factor supporting gold in the last few days.

The dollar is sliding

Meanwhile, the US dollar (UUP) has been sliding. After today’s weaker jobs report, the US dollar fell to a two-and-a-half month low. This week alone, it has lost 1.1%. Since gold is dollar denominated, gold and the dollar are inversely related and the dollar’s fall is boosting gold.

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