Gold futures end lower after ‘hot’ U.S. jobs report boosts the dollar, Treasury yields

Price action

• Price of gold for February delivery
  GC00,
  -0.07%

  GCG23,
  -0.07%
  shed $5.60, or 0.3%, to settle at $1,809.60 per ounce on Comex, with prices for the most-active paring their weekly rise to 3.2%.

• Silver for delivery in March
  SIH23,
  -0.16%
  climbed by 41 cents, or 1.8%, to $23.25 per ounce after tacking on 4.9% on Thursday. For the week, prices were up 8.5%.

• March palladium
  PAH23,
  -0.68%
  fell $45.20, or 2.3%, to $1,901.10 per ounce, ending the week 4.4% higher, while platinum prices for delivery in January
  PLF23,
  +0.04%
  were down $28.30, or 2.7%, to $1,026.60 per ounce, tacking on 3.9% for the week.

• Copper prices for March delivery
  HGH23,
  -0.57%
  added 3 cents, or 0.9%, to $3.8505 per ounce, posting a weekly rise of nearly 6.2%.

Market drivers

The U.S. created 263,000 new jobs in November, a historically strong pace of hiring.

The stronger-than-expected jobs report had some “higher inflation implications,” said Jim Wyckoff, senior analyst at Kitco.com, in a daily report.

Hourly pay also rose by a sharp 0.6% last month to an average of $32.82, marking the biggest advance in 13 months. “Those figures were deemed hot by the marketplace,” said Wyckoff.

“Taken altogether, this report is deemed too strong for the Federal Reserve’s liking and suggests the U.S. central bank will be reluctant to back off too much on its heretofore aggressive monetary policy tightening,” he said.

Earlier in the week, Powell said that the central bank may decide to raise interest rates at a slower pace at its next policy meeting. Treasurys rallied, pulling down yields, while the dollar
DXY,
+0.15%
retreated, helping to pull gold futures up by more than 3% on Thursday to their highest finish since Aug. 12.

Lower bond yields decrease the opportunity cost of holding nonyielding assets like gold, while a softer dollar makes many commodity prices, which are often priced in dollars, less expensive to buyers using other currencies.

Following the jobs data Friday, however, the ICE U.S. Dollar index
DXY,
+0.15%
traded as high as 105.585 before easing back, while 10-year Treasury yields
TMUBMUSD10Y,
3.583%
were up over a point at 3.5417%.

“Powell stole the U.S. NFP thunder earlier this week and that is what traders have been thinking,” said Naeem Aslam, chief market analyst at AvaTrade, in a market update. However, today’s number has “confirmed that there is no shortage of thunder or drama when it comes to the U.S. economic data.”

The data has “confirmed that if the Fed wants to increase the interest rate more aggressively, it can because the job market is still robust,” said Aslam.

Gold moved lower on the back of this data, but move has been very “dramatic, and this means that a recovery is still on the cards for gold prices,” he said.