How The June U.S. Jobs Report Impacted Gold Prices

July 10th, 2017 by Trefis Team
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Wheaton Precious Metals

Gold prices edged towards the $1,200 per ounce mark in the wake of a robust U.S. jobs report for the month of June.

Gold Prices, Source: Kitco

The Labor Department reported job gains totaling 222,000 for the month of June, a figure which was much higher than expected. [1] The favorable jobs report strengthened expectations of the Federal Reserve staying on course for another 25 basis point rate hike in 2017, translating into more pressure on gold prices. [2]

Gold is largely seen as a safe-haven asset from an investment point of view, with investors favoring the yellow metal in times of macroeconomic uncertainty. However, improving economic conditions tend to drive investors towards other asset classes such as equities. Moreover, rising interest rates (which usually coincide with improving economic conditions) tend to lower the investment demand for gold as well, since securities linked to interest rates become more attractive vis-a-vis gold, which does not offer any coupon/interest component in terms of returns. Steady gains in economic and jobs growth are expected to keep prices subdued in the near term, as illustrated by our forecast shown below.

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Despite the decline in gold prices over the past few days, further downside risks remain. While a political deadlock in Congress has stymied President Trump’s legislative agenda, any progress on the same, particularly on tax reform or the infrastructure plan, could unlock more economic growth and depress gold prices further. We will be keeping a close eye on developments in Washington and will alter our gold pricing forecasts accordingly, in case of any material developments.

Have more questions about Silver Wheaton? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such  communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Silver Wheaton

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Notes:
  1. US nonfarm payrolls total 222,000 in June vs 179,000 expected, CNBC [↩]
  2. The Fed’s New Dot Plot, Bloomberg [↩]