Gold futures settled lower on Friday, posting a a weekly loss of more than 1%, with prices pressured by a rise in Treasury yields on the heels of a climb in U.S. March employment and wages.
The U.S. created a robust 431,000 jobs in March and the unemployment rate slid to 3.6% from 3.8%, the government reported Friday. Hourly pay rose sharply in March, pushing the increase in the past 12 months to 5.6%.
“The fact the report was not a weak one suggests the Fed won’t be swayed in its aggressive approach on raising interest rates,” Jim Wyckoff, senior analyst at Kitco.com, told MarketWatch.
“That may be near-term negative for gold, due to rising U.S. interest rates being supportive for the U.S. dollar, including U.S. Treasury yields rising,” which is also a negative for gold, he said.
Still, longer term, “the inflationary implications of rising U.S. interest rates should be supportive for gold and will likely keep a floor under the market to too far below present price levels,” said Wyckoff.
Gold for June delivery
fell $30.30, or nearly 1.6%, to settle at $1,923.70 an ounce on Comex. May silver
fell 48 cents, or 1.9%, to $24.654 an ounce. Based on the most-active contracts, gold marked a 1.6% weekly decline, while silver lost almost 3.8%, according to Dow Jones Market Data.
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Although the nonfarm payrolls figure was below market expectations, “it still illustrated resilience in the face of soaring inflation and the lingering effect of the pandemic,” Lukman Otunuga, manager, market analysis, at FXTM, told MarketWatch. “Gold bulls are likely to be hunted by an appreciating dollar and rising Treasury yields as rate hike expectations mount, inviting bears back into the scene.”
The yield on the 10-year Treasury note
touched highs above 2.45% on Friday. Strength in Treasury yields can be a negative for gold as they raise the opportunity cost of holding nonyielding assets.
The dollar index also rose, and traders know from the jobs data that “another rate hike is coming,” said Naeem Aslam, chief market analyst at AvaTrade.
The ICE U.S. Dollar Index DXY was also up by 0.3% in Friday dealings, putting pressure on dollar-denominated gold prices.
Overall, the Russia-Ukraine war “has provided solid support to gold and other safe-haven assets, so any signs of progress on peace talks are likely to see some of that support fade,” said Rupert Rowling, market analyst at Kinesis, in a note.
Gold and silver both logged weekly and quarterly gains Thursday, boosted in part by safe-haven demand tied to Russia’s invasion of Ukraine.
Also, “the inflation headache that is troubling governments and central banks is not going to ease any time soon, with more interest rate hikes expected in April to try and curb rising prices,” wrote Rowling. “These dual headwinds of an unwinding of fear trading and the prospect of rising interest rates making the non-yield bearing asset of gold less attractive,” leaving the $1,900 level as a key indicator of underlying support for gold.
In other Comex metals trade, May copper
lost 1.3% to $4.689 a pound, leading to a 0.2% loss for the week. July platinum
declined by 0.7% to $988.60 an ounce, ending down 2% for the week. June palladium
settled at $2,267.50 an ounce, up 0.5%, with prices posting a weekly loss of over 5%.