The gold market reacted negatively to the latest U.S. jobs report as concerns grew that the Federal Reserve may raise interest rates sooner than expected. The U.S. Labor Department announced another strong job growth for April, with the economy adding 559,000 jobs, surpassing economists’ expectations. This news prompted fears of inflation and prompted the Fed to consider raising rates in June.
The spot price of gold fell from its record high of over $2,080 to under $2,000 at one point. Gold for June delivery on New York’s Comex settled at $2,024.80 an ounce, down $30.90, or 1.5%, on the day, after hitting a session low of $2,007.10. On Thursday, Comex gold for June hit an all-time high of $2,082.80 an ounce.
Gold is often seen as a hedge against inflation, and concerns about rising prices have driven up its value in recent months. However, the strong jobs report has led some to believe that the Fed may raise rates sooner than expected to control inflation. Higher interest rates can boost the value of the dollar and reduce demand for gold.
The Fed has previously stated that it plans to maintain its current accommodative monetary policy until the economy has fully recovered from the pandemic. However, the recent jobs report suggests that the recovery may be happening faster than expected. This has led to speculation that the Fed may begin to taper its bond-buying program sooner than anticipated and possibly even raise rates.
The gold market is likely to remain volatile in the coming weeks as investors weigh the impact of the jobs report and other economic indicators on the Fed’s monetary policy. Investors will also be closely watching the upcoming Federal Open Market Committee meeting in June for any hints about the Fed’s plans for interest rates.
In conclusion, the gold market tumbled after the latest U.S. jobs report suggested that the economy is recovering faster than expected, fueling fears of inflation and prompting speculation that the Fed may raise interest rates sooner than anticipated. The market is likely to remain volatile in the coming weeks as investors await further signals from the Fed regarding its monetary policy.