(Kitco News) - The gold market continues to hover around $2,350 an ounce but could see some bullish momentum as the U.S. labor market continues to cool, with private companies hiring fewer workers than expected in May, according to the latest report from private payroll processor ADP.
On Wednesday, ADP said that 152,000 jobs were created last month. The report missed expectations, as consensus forecasts called for job growth of around 173,000.
“Job gains and pay growth are slowing going into the second half of the year,” said Nela Richardson, Chief Economist at ADP. “The labor market is solid, but we're monitoring notable pockets of weakness tied to both producers and consumers.”
The gold market is seeing solid gains in initial reaction to the latest employment data. August gold futures last traded at $2,356.40 an ounce, up 0.37% on the day.
Along with the disappointing headline data, the report noted weaker wage inflation. Year-over-year pay gains for people who changed jobs fell for the second month; pay for job-changers was up 7.8%. At the same time, wages for people who stayed in their jobs held steady for the third month at 5%.
The report noted that the U.S. economy saw modest broad-based job growth through all sectors; however, the biggest move was in the manufacturing sector, which lost 20,000 jobs last month. Meanwhile, within the service sectors, trade/transportation/utilities saw the biggest gains, creating 55,000 new positions in May.
Growing slack in the U.S. labor market continues to support growing market expectations that the Federal Reserve will loosen its monetary policy before the end of the year. Markets see a more than 70% chance of a rate cut in November.
Commodity analysts have said that while gold is consolidating around $2,350 an ounce, there is still a lot of interest in the precious metal. A Federal Reserve rate cut could spark new investment flows into gold and silver.
