Gold Price Steadies as Powell’s Inflation Quest Offsets Encouraging Jobs Report

October 5, 2019

New York (Oct 5)  A better-than-expected U.S. jobs report caused the chugging rally in gold to pause on Friday. Federal Reserve Chairman Jerome Powell's hints that he might want to cut rates again to stop inflation from slipping too low helped longs in the yellow metal keep the market firmly above its $1,500 support.

U.S. gold futures for December delivery settled down 90 cents, or 0.1%, at $1,506.20 per ounce after the Labor Department reported a Nonfarm Payrolls growth of 136,000 in September, which helped lower America’s unemployment rate to a 50-year low.

Spot gold, reflective of trades in bullion, was up $2.42, or 0.2%, at $1,507.44 by 2:50 PM ET (18:50 GMT).

“Gold (is) continuing to shine brightly in these turbulent times due, among other things, to higher demand for haven assets,” Fawad Razaqzada, analyst at said in note. “Also supporting the precious metal is a falling U.S. dollar and rising bond prices - or put in another way, falling yields - as this is boosting the appeal of noninterest-bearing assets like gold and silver.”

Since hitting a two-month low of $1,465 in Tuesday’s intraday trade, gold futures have gained more than $41, or nearly 3%.

The Fed is examining strategies that might help it to symmetrically and sustainably achieve 2% inflation, Powell said in opening remarks at a Fed Listens event sponsored by the Board of Governors of the Federal Reserve System in Washington. This would help prevent inflation expectations from slipping too low, as they appear to have done in several advanced economies, he added.

So far this year, the Fed has conducted two quarter-point rate cuts, back-to-back in July and September, to try and preserve the U.S. economy's record decade-long growth.

"While we believe our strategy and tools have been and remain effective, the U.S. economy, like other advanced economies around the world, is facing some longer-term challenges - from low growth, low inflation and low interest rates," Powell added.

The odds of a Fed rate cut in October slipped to 77% from 87% a day earlier on Friday, according to's Fed Rate Monitor Tool after the jobs news.

Risk appetite across financial markets has diminished, while appeal for safe havens has grown with the weak macroeconomic numbers that came amid concerns that there might be little progress again at U.S.-China trade talks reopening on Oct. 7.

While the September jobs report was encouraging, average hourly earnings stagnated over the month, breaking a string of solid gains in recent months. They’re now up only 2.9% on the year, having run north of 3% for most of 2019.

“The issue is not that the U.S. economy and (labor) markets are weak, but that a collapse in confidence slows activity below the economy’s historically low stall speed,” Lena Komileva, managing director of the G+ economics consultancy, said via Twitter. That triggers “a recessionary vicious cycle in confidence, capital market (volatility) and U.S. balance sheet health.”

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