Gold and silver futures end at highest levels since May after U.S. jobs data

Gold and silver futures posted their highest settlements since May on Friday, as downbeat U.S. economic data helped put pressure on the dollar and fueled expectations for an interest-rate reduction by the Federal Reserve.

U.S. economic data indicate a slowing economy, with a weaker labor market and services-sector data having “particularly influenced market expectations, increasing the likelihood of a Fed rate cut in the coming months,” said Milad Azar, market analyst at brokerage XTB MENA, in emailed commentary.

The U.S. created a larger-than-expected 206,000 new jobs in June, official data showed Friday. However, the government also said 111,000 fewer jobs were created in May and April than originally reported, while the unemployment rate rose to 4.1% for the first time since November 2021.

The data “clearly indicate that the Fed is facing significant challenges as the economy continues to deteriorate,” Naeem Aslam, chief investment officer at Zaye Capital Markets, told MarketWatch on Friday.

The labor market and purchasing managers’ index data have shown that the economy has entered a period of slow cycles, which means that the “Fed needs to act now before being responsible for another self-inflicting injury,” he said.

Against that backdrop, prices for precious metals found support, with gold for August delivery GCQ24, -2.03% GC00, -2.03% settling at $2,397.70 an ounce on Comex, up $28.30, or 1.2%, for the session.

Based on the most active contract, gold prices were up 2.5% for the week, which was the strongest weekly rise since the week ended May 10, according to Dow Jones Market Data. Gold settled at its highest since May 21.

“Gold prices are up because the dollar is down, and with the rise in the unemployment rate, U.S. recession risks are up due to the Sahm Rule,” Jason Schenker, president of Prestige Economics, told MarketWatch. The Sahm Rule is a recession indicator based on the unemployment rate.

The ICE U.S. Dollar Index DXY was down 0.2% at 104.99 in Friday dealings, poised for a weekly loss of 0.9%. Weakness in the dollar can boost demand for dollar-denominated precious-metals prices.

Silver also rallied Friday, with its September futures contract SIU24, -2.78% SI00, -2.78% gaining 85 cents, or nearly 2.8%, to settle at at $31.69 an ounce and log its highest finish since May 17. Prices for the white metal rose 7.2% for the week, the largest weekly rise since the week ending May 17.

Also see: Silver beat gold, copper — and even the S&P 500 — in the second quarter. What’s next?

“With likely future Fed rate cuts and dollar weakness, gold prices are likely to rise on trend,” Schenker said. “Further slowing of U.S. inflation, increased geopolitical and political risks, and dollar weakness are poised to send gold prices higher.”

Looking ahead to next week, precious-metals traders are likely to pick up the momentum in prices “exactly from the place where they left things” Friday, said Aslam.

It’s also “important to keep in mind that not everyone had a chance to react to today’s U.S. [jobs] number, as the vast majority is still off” due to Thursday’s July Fourth holiday, he noted. “Therefore, we maintain our bullish stance on gold prices, believing that the path of least resistance is currently inclined towards the upside.”