Gold was well supported on Wednesday as a miss by the ADP employment report served as another indication that US economic growth is waning.
Gold for June delivery on the Comex division of the New York Mercantile Exchange was last up $2.70 at $1,195.90 per ounce. Trade has ranged from $1,187.40 to $1,196.90.
US private employers added 169,000 jobs last month, the fewest since January 2014, and well below the the 199,000 forecast, according to the ADP National Employment Report released this morning.
“Fallout from the collapse of oil prices and the surging value of the dollar are weighing on job creation,” Mark Zandi, chief economist of Moody’s Analytics, said. “Employment in the energy sector and manufacturing is declining. However, this should prove temporary and job growth will reaccelerate this summer.”
Disappointing labour reports generally support gold as they weaken the dollar and put pressure on Federal Reserve to push off raising interest rates. The dollar was last 0.84 percent softer at 1.128 against the euro.
The members of the Fed’s policy board are locked in what’s become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008.
The current market consensus is that the first hike will happen in the fourth quarter, but the Fed does acknowledge the it’s monetary policy is entirely data dependent.
There’s growing sense that the US economy is starting to fade – US first quarter GDP grew by just 0.2 percent as output was negatively impacted by harsh winter weather and a stronger dollar.
Meanwhile, America’s trade deficit of $51.4 billion in April was much larger than the expected $41.2 billion and the worst reading since October 2008, which has been attributed to a surge in imports through West Coast ports – operations there have normalised activity following months of labour disputes.
“Friday’s US non-farm labour market report will now be all the more important, as it needs to show whether the weakness in the US economy during the first quarter was merely temporary, as the Fed believes. Until the figures are released, gold is likely to remain capped at $1,200,” Commerzbank noted.
Earlier today, China’s HSBC services PMI disappointed at 52.9 from the expected 53.1, which signalled further slowdown in the key metals consuming country, increasing the likelihood that Beijing will introduce further stimulus.
As for the other precious metals, Comex silver for July delivery was last up 5.1 cents at $16.630 per ounce. Trade has ranged from $16.385 to $16.635.
Platinum for July delivery on the Nymex was down $2.30 at $1,146.50 per ounce, while the most-actively traded palladium contract was at $794.75 per ounce, down 20 cents.
The post Gold holds just below $1,200/oz following lacklustre US jobs report appeared first on The Bullion Desk.
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