Gold futures crashed to close out the first trading week of June, fueled by a hotter-than-expected jobs report that sent US Treasury yields and the greenback soaring. The yellow metal is now on track for a weekly loss and might struggle to return to $2,400, especially if inflation comes in higher than expected next week.
August gold futures plummeted $55.00, or 2.3%, to $2,335.90 per ounce at 14:46 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold prices are poised for a weekly decline of 0.5%, paring their year-to-date rally to below 13%. Gold prices are now trading at their lowest levels in two weeks.
Silver, the sister commodity to gold, tanked to finish the trading week. July silver futures cratered $1.582, or 5.04%, to $29.785 per ounce. The white metal will post a weekly loss of about 2.5%, but it is still up 24% year-to-date.
According to the Bureau of Labor Statistics (BLS), the US economy created 272,000 new jobs in May, up from a downwardly revised 165,000. This was higher than economists’ expectations of 185,000. The unemployment rate rose from 3.9% to a higher-than-expected 4%. Average hourly earnings rose 0.4% month-over-month and inched higher to 4.1% year-over-year. The labor force participation rate dipped to 62.5%, while average weekly hours were unchanged at 34.3.
Financial markets were mixed after the employment data, with the leading benchmark indexes reversing their pre-market losses and turning positive after the opening bell.
In addition, the US dollar and US Treasury yields rocketed to end the trading week.
The US Dollar Index (DXY), a measurement of the greenback against a basket of currencies, surged 0.63% to 104.76, from an opening of 104.10. The index will post a weekly boost of 0.1%, adding to its year-to-date gain of about 3.4%.
A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
Bond yields were up across the board, with the benchmark ten-year yield adding 14.7 basis points to 4.428%. The two-year yield added 13.9 basis points to 4.859%, while the 30-year bond rose 12.1 basis points to 4.551%.
Gold is sensitive to higher rates because it can influence the opportunity cost of holding non-yielding bullion.
Investors fear the solid jobs report will discourage the Federal Reserve from cutting interest rates earlier. According to the CME FedWatch Tool, the futures market is penciling in a quarter-point rate cut in September or November. However, conditions could change rapidly as the consumer price index (CPI) will be released next week, and a smaller reading could reignite a dovish position.
In other economic data, used car prices fell 0.6% monthly, and wholesale inventories rose at a smaller-than-expected pace of 0.1%.
In other metal commodities, July copper futures plunged $0.158, or 3.38%, to $4.52 per pound. July platinum futures declined $29.60, or 2.93%, to $982.00 an ounce. July palladium futures fell $23.10, or 2.46%, to $914.50 per ounce.