Gold prices jumped over 2.5% on Thursday, with spot gold reaching around $4,134 an ounce and US gold futures advancing, after US jobs data for June came in much lower than anticipated. The US economy added only 57,000 jobs in June, significantly below the 110,000 forecast, and combined revisions for April and May saw another 74,000 jobs erased. This weak jobs report led traders to scale back expectations for a Federal Reserve rate hike in September, with market-implied odds falling to less than 50% from an earlier 67-75% chance. Since gold does not offer a yield, it typically benefits when expectations for higher interest rates diminish.
The decline in job additions was partly attributed to a 61,000 job loss in the leisure and hospitality sector, despite hopes for a boost from World Cup tourism. While the unemployment rate unexpectedly fell to 4.2% from 4.3% in May, this was largely due to a decrease in the labor force participation rate to 61.5%. Average hourly earnings rose 0.3% month-on-month, bringing the annual wage growth to 3.5%.
Further supporting gold prices was a drop in oil prices, which alleviated inflation concerns. Increased oil shipments through the Strait of Hormuz and progress in indirect US-Iran talks contributed to oil price declines, with Brent crude dropping 1.3% to $70.66 and US West Texas Intermediate losing 1.5% to $67.54. Federal Reserve Chair Kevin Warsh had also noted easing inflation expectations the previous day. Additionally, central banks boosted their gold reserves by 41 tonnes in May, valued at approximately $5.4 billion, indicating continued official sector buying. The weaker dollar also made gold cheaper for international buyers, adding to its appeal.
