Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinNew York spot gold jumped 1.2% to close at a fresh one-month high above $2,388 after downbeat employment data stoked expectations for rate cuts from the Fed, pressuring Treasury yields and the dollar. The metal rose 2.6% for the week. Silver surged 2.7% to $31.30, notching a weekly increase of 7.4%.

The US economy added 206,000 new jobs in June, slightly more than most forecasts. But beneath the reasonable headline number, the details of the governments nonfarm payrolls report showed significant weakening in the labor market.

Most of the hiring was for government rather than private sector jobs. Totals for April and May were revised sharply lower, with 110,000 fewer positions created than initially reported. The unemployment rate rose to a 30-month high of 4.1%. And wages grew at the slowest pace in three years.

Combined with recent data showing cooler consumer and wholesale inflation, along with weaker PMI readings in both the services and manufacturing sectors, the soft employment data increases the likelihood that the Fed will have to act soon to prevent a sharp downturn in the economy.

Fed fund futures traders now put the odds of a rate cut in September at 78%, up from around 64% a week ago, according to CME FedWatch. The odds of a second cut in December rose to 74% from 64% a week ago.

Benchmark 10-year Treasury yields retreated under 4.3% on the shifting rate view, supporting gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

Tracking lower with yields, the dollar slipped nearly 0.3% against major rivals, resulting in a weekly decline of nearly 1%. A weaker buck boosts gold and other commodities by them the less expensive overseas.

Rising oil prices also lifted gold this week. US benchmark WTI crude added 0.4% today and 3% this week for its fourth straight weekly win. Expectations for strong summer demand and a Q3 supply deficit are fueling the increase. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

Platinum rose 3.8% today and this week. Palladium added 0.4% for a weekly rise of 6.3%.

At the New York spot close: gold jumped $28.70 to $2,388.50; silver surged 84 cents to $31.39; platinum picked up $38.30 to $1,040.80; and palladium rose $4.30 to $1,039.60 an ounce.