Gold Prices fell on Friday

Gold Prices Fall as FOMC Rate Hike Odds Rise After Jobs Report

By:Thomas Westwater

Metal Prices Sink After U.S. Jobs Data  

Precious metal prices fell on Friday after traders digested U.S. jobs data that points to a stubbornly resilient labor market. According to the Bureau of Labor Statistics, the United States added 339,000 jobs last month, beating Wall Street estimates called for around 190,000 jobs added. 

The jobless rate increased to 3.7% from 3.4%, a big jump that reveals some underlying softening despite the large headline figure beat. Still, the previous two months saw upward revisions that totaled around 90,000 jobs.

Fed Focus Puts Economic Data on Tap for Metal Traders  

The drag on metal prices came after bond traders reacted to the jobs data, with yields increasing along the curve as Treasuries sold off. Those traders see the jobs report as a reason for the Federal Reserve to hike interest rates further, which would work against the non-interest-bearing asset.  

Jerome Powell and his lieutenants will meet on June 13 to decide the FOMC’s next move on interest rates. Previously, voting members signaled an appetite to hold rates. However, today’s data may have nixed that narrative.

The chances for a 25-bps rate hike at the next meeting increased to 28.7% from 20.4% a day ago, according to the CME’s FedWatch Tool. With the jobs report being one of the last data points ahead of this month’s FOMC meeting, gold prices may face headwinds until the threat of further rate hikes fades.

Gold Prices Lose Strength Below Psychological Level 

Looking at the daily chart for gold (/GC), prices have failed to retake the 2,000 psychological level after selling offer in May. That suggests bulls are waiting on the sidelines for now, and the move under the 100-day Simple Moving Average (SMA) may suggest additional downside in the coming week. A drop below 1,960, where support appeared early this week and last, could induce further weakness.

/GCQ3 chart in tastytrade platform

Silver Tells Similar Story to Gold 

Silver prices also look poised for more weakness heading into the FOMC. However, the metal is holding up slightly better than gold in a technical sense, with prices holding above the 100-day SMA. That sets the stage for prices to consolidate above the moving average until traders gain clarity over the outlook on interest rates.

/SIN3 chart in tastytrade platform

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