The gold market is seeing some modest profit-taking but is holding above $2,900 and could see further support as the U.S. private sector labor market lost significant momentum last month, according to private-sector payrolls processor ADP.
ADP said that 77,000 jobs were created in February. The report missed expectations as consensus forecasts called for job gains of 141,000. According to the report, hiring slowed to the smallest level of gains since July, with trade and transportation, health care and education, and information showing job losses.
“Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month,” said Nela Richardson, chief economist, ADP. “Our data, combined with other recent indicators, suggest a hiring hesitancy among employers as they assess the economic climate ahead.”
The gold market is not reacting much to the disappointing employment report. Spot gold last traded at $2,912.50 an ounce, down 0.14% on the day.
Along with the cooling labor market, the report also noted that wage inflation is slowing. The report said that for workers who changed jobs, wages saw an annual increase of 6.8%, down slightly from 6.7% reported in January. Meanwhile, wages for workers who stayed in their current jobs saw their wages remain flat at 4.7%.
Although gold is struggling as it continues to trade near last week’s record highs, many commodity analysts have said that the precious metal remains well supported as the U.S. economy continues to struggle.
Economists note that the latest employment data put the Federal Reserve in a difficult position. The U.S. central bank has said it is in no hurry to cut interest rates as the labor market remains relatively healthy and inflation risks remain elevated. However, the labor market is now starting to cool, but inflation pressures remain stubbornly high.
Commodity analysts have said that the growing stagflation risks should provide solid support for gold.
Source: Neils Christensen Kitco
