Gold holds firm as US jobs data eases rate hike fears

Gold held firm on Monday after data on US jobs growth in April and downward revisions to previous figures suggested that the Federal Reserve would be in no hurry to raise interest rates next month.

Spot gold was little changed at $1,187.80 an ounce by 0325 GMT after gaining 0.3 per cent on Friday after the data.

US non-farm payrolls increased 223,000 in April, in line with market expectations of 224,000, but March payrolls were revised to show only 85,000 jobs were created, the smallest number since June 2012.

The data burnished gold’s demand as a safe haven, while tempering views that a US rate rise could come at the Fed’s next policy meeting in June.

“This week, gold may inch marginally higher towards $1,200 as the weak US labour report should lend support to continued low interest rates in the United States,’’ said Howie Lee, an analyst at Phillip Futures.

The revisions to the March payroll numbers were particularly worrying and should support gold’s rally, he said.

Fed rate hike

Traders pared bets that the Fed would move to raise rates by the end of the year, seeing only a 51 per cent chance that the first increase would come in December. Other aspects of the job report sent mixed signals and kept investors on edge.

The unemployment rate dropped to a near-seven-year low, suggesting underlying strength in the economy at the start of the second quarter that could keep alive the prospects of a rate rise later this year, capping gains in gold. The uncertainties were reflected in investor positioning.

Holdings in SPDR Gold Trust, the top gold-backed exchange-traded fund, saw the sharpest decline this year on Friday. Speculators had cut their bullish gold bets for the first time in four weeks in the week ended May 5.

Bullion’s gains were also capped by a rally in Asian equities, which were boosted by China’s latest cut in interest rates to bolster its economy. It had cut rates for the third time in six months on Sunday and analysts forecast policymakers would relax reserve requirements and cut rates again in coming months.