Gold prices continued to hold strong gains on Wednesday after weaker-than-expected U.S. employment data reinforced expectations that the Federal Reserve may still be forced toward interest rate cuts later this year.
According to the latest ADP employment report, private-sector payrolls increased by 109,000 jobs in April, above March’s revised 61,000 gain but below market expectations of 118,000. The softer reading adds to growing evidence that the U.S. labour market is gradually losing momentum.
Spot gold surged overnight above the $4,700 an ounce level before easing slightly on profit taking. The metal was last trading near $4,683 an ounce, still up almost 3% on the day, while silver jumped more than 6% toward $78 an ounce.
ADP Chief Economist Dr. Nela Richardson said hiring conditions remain uneven across the economy.
“Small and large employers are hiring, but we’re seeing softness in the middle,” Richardson said. “Large companies have resources to deploy, and small ones are the most nimble, both important advantages in a complex labor environment.”
The report also showed relatively moderate wage pressures, helping calm inflation concerns. Workers who remained in their jobs saw annual wage growth of 4.4%, while employees changing jobs recorded wage growth of 6.6%.
Despite the softer employment figures, economists say the broader U.S. economy remains resilient. Bill Adams, Chief U.S. Economist at Fifth Third Commercial Bank, noted that tax cuts, public spending, and previous Federal Reserve rate cuts continue to support hiring activity.
However, the ongoing Middle East conflict remains the major wildcard for markets.
“The longer it drags on, the higher energy prices will rise and the greater the strain on consumer finances will be,” Adams warned.
At the same time, optimism surrounding a possible U.S.-Iran agreement helped lift sentiment across financial markets and triggered a strong rebound in precious metals.
Reports suggest negotiations between the United States and Iran are progressing toward a potential agreement to end hostilities in the Gulf region. During the conflict, soaring oil prices had fuelled fears that inflation would remain elevated, forcing central banks to maintain higher interest rates for longer.
As those fears began to ease, gold rallied sharply.
Spot gold recorded its strongest daily rise in nearly a month, climbing as much as 3.6%, while gold futures in New York approached $4,710 an ounce.
Peter Grant, senior metals strategist at Zaner Metals, said the prospect of a peace agreement had created short-term relief for the gold market, although volatility remains highly sensitive to developments in the Middle East.
Meanwhile, commodity strategists continue to see strong long-term support for gold regardless of whether the Federal Reserve cuts rates aggressively this year.
A major factor remains ongoing central bank buying. According to the World Gold Council, official sector gold purchases remained elevated last quarter despite some countries trimming holdings.
Investors will now turn their attention to Friday’s U.S. non-farm payrolls report, which could become the next major catalyst for gold prices and Federal Reserve expectations.
