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Gold nears $1,300, as weak U.S. jobs data places June rate hike in doubt

Investing.com -

Investing.com -- Gold surged more than $20 an ounce on Friday resuming its push back to multi-year highs, as nonfarm payrolls in the U.S. rose in April by its lowest level in seven months, placing a June interest rate hike by the Federal Reserve firmly in doubt.

On the Comex division of the New York Mercantile Exchange, gold for June delivery wavered between $1,276.00 and $1,296.55 an ounce, before settling at $1,296.50, up 24.20 or 1.92% on the session. Gold has closed higher in seven of the last 10 sessions and has soared more than 4% since the Federal Open Market Committee (FOMC) held interest rates steady at its two-day April meeting last week. Over the first four months of the year, the previous metal has surged more than 21% and is on pace for one of its strongest first halves in more than a decade.

Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,322.10, the high from August 8, 2014.

On Friday morning, the U.S. Department of Labor's Bureau of Labor Statistics (BLS) said domestic nonfarm payrolls in April increased by 160,000, considerably below a downwardly revised gain of 209,000 in March and the lowest monthly total since last September. Analysts expected to see an increase of 200,000, in line with March's three-month average of 202,000. The losses were concentrated in mining, government and retail, partially offset by improved conditions in the Professional and Business Services industry.

The unemployment rate, meanwhile, remained unchanged at 5%, slightly above consensus forecasts for a 0.1% decline to 4.9%. In January, the unemployment rate in the U.S. fell to its lowest level in eight years. The U-6 unemployment rate, which also measures workers that are marginally attached to the labor market, fell 0.1 to 9.7%, sharply below last April's rate of 10.4%. By comparison, the Fed's preferred gauge of U.S. unemployment, peaked at 18% in 2010 at the end of the Financial Crisis.

Elsewhere, average hourly wages increased by 0.3% last month, in line with consensus estimates. The Labor Force Participation Rate fell by 0.2% to 62.8%, while the average workweek stayed unchanged at 34.5 hours per week.

While the Fed has voiced concern with the sluggish pace of inflation over the last several months, it had expressed optimism with the broad improvement in the labor market prior to Friday's report. In April, the FOMC said in its monetary policy statement that it will take a data-driven approach with the timing of its next interest rate hike. The FOMC's benchmark Federal Funds Rate has remained at its current level between 0.25 and 0.50% at each of the Fed's three meetings this year. At the Fed's final meeting of 2015, the U.S. central bank ended a seven-year zero interest rate policy by approving its first rate hike in nearly a decade.

Any rate hikes this year are viewed as bearish for gold, which struggles to compete with high yield bearing assets in rising rate environments.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.20% to an intraday low of 93.22, before rallying to 93.63 early in the afternoon session. The index is down more than 6% since early-December. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Silver for May delivery soared 0.253 or 1.46% to $17.580 an ounce.

Copper for March closed at $2.154 a pound, finishing flat for the session.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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