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Gold settles at a nearly 3-month high after a weaker-than-expected U.S. April jobs report

MarketWatch logo MarketWatch 5/7/2021 Myra P. Saefong
a close up of a bench © Martin Abbugao/AFP/Getty Images
METALS STOCKS
a close up of a bench:  Martin Abbugao/AFP/Getty Images Martin Abbugao/AFP/Getty Images

Video: S&P, Dow rise to record highs (Reuters)

Gold prices climbed Friday to log their highest finish in almost three months after a closely watched reading of U.S. labor conditions in the U.S. for the month was much weaker than forecast.

U.S. nonfarm payrolls were “significantly below recent estimates,” and gold prices “spiked in response,” said Jason Teed, co-portfolio manager of the Gold Bullion Strategy Fund QGLDX.

The U.S. Labor Department reported Friday that the economy gained 266,000 jobs in April, far fewer than even the most subdued forecast for the month, raising some questions about the strength and pace of the recovery from the COVID pandemic.

The data helped to feed “some expectations that the [Federal Reserve] will continue to keep interest rates low for the time being,” Teed told MarketWatch. “This would make the metal relatively more attractive to investors than bonds.”

Indeed, Minneapolis Fed President Neel Kashkari, speaking on Bloomberg after the Friday jobs report, said that April surprise for jobs shows the importance of basing monetary policy on outcomes, not forecasts.

June gold added $15.60, or 0.9%, to settle at $1,831.30 an ounce, following a 1.8% rise Thursday. Prices for the most-active contract was around 3.6% higher for the week and marked their highest finish since Feb. 10, FactSet data show.

July silver meanwhile, settled flat at $27.48 an ounce, for a more than 6% rise for the week after settling Thursday at the highest since late February.

Following the jobs data, ” one thing is clear — that the [Fed] loose monetary policy isn’t going anywhere soon,” said Naeem Aslam, chief market analyst at AvaTrade, in a market update.

“The dollar index was weaker going into the release of this data and now we know for certain that there is plenty of more weakness ahead” for the dollar, he said, which would tend boost prices for dollar-denominated commodities such as gold.

The ICE U.S. Dollar Index shed 0.7% Friday, contributing to a weekly loss of 1.1%.

Gold futures closing above $1,800 on Thursday was “important for keeping the near-term uptrend in place,” said Dan Russo, portfolio manager at Potomac Fund Management.

On a technical trading basis, the two important price levels to watch in terms of “upside potential” are at roughly $1,868 and $1,914 an ounce, he told MarketWatch. Prices are likely to see a “far amount of resistance that must be overcome” in the $1,900 to $1,950 zone.

So the jobs data “was likely enough of a disappointment to satisfy the gold bulls, especially after it closed above $1,800,” and at the same time, the report will likely calm fears that the Fed “will back off of its easy money policy stance sooner than expected,” Teed said.

And “the longer that the market expects the Fed to remain accommodative, the longer there will likely be a tailwind for copper prices,” he said.

Copper futures settled at a record high on Friday, according to Dow Jones Market Data, with the July contract up 3.2% at nearly $4.75 a pound, after touching an intraday high at just over $4.75. For the week, prices rose 6.3% — the biggest weekly rise since the week ended Feb. 19.

John Caruso, senior asset manager at RJO Futures, told MarketWatch said he’s still bullish on silver, but prices may be close to taking a breather.

China’s copper imports fell around 12% in April so “there is a catalyst for copper to catch a breath here,” he said. Still, there’s a likely “great buying opportunity from lover levels.”

Read: Copper looks to set fresh record as economic recovery, electric cars drive rise in metal’s price

Also see: Electric vehicle market growth is a blessing for some metals — and not a big worry for oil

July platinum lost 0.3% to $1,254.50 an ounce, settling over 4% higher than the week-ago settlement, while June palladium fell 0.8% to $2,925.10 an ounce, down roughly 1% for the week after climbing past $3,000 earlier this week to touch a record high.

Also see: Iron-ore prices hit a record high with appetite for steel ‘far beyond expectations’

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