Mixed U.S. Jobs Report Softens Dollar; Boosts Demand for Gold

April Comex Gold futures soared after the release of the latest U.S. Non-Farm data for February on Friday on strong investment demand. Although the headline number beat expectations, U.S. equity markets weakened, lending support to gold which is trading at its highest level in 13 months.

Investors are buying gold at a near-record pace, driven by concerns over the global economy, which have depressed expectations that the Federal Reserve will move forward with its plans to implement fresh interest rate hikes in 2016. This demand was demonstrated by the strong interest in the SPDR Gold Shares ETF this week. Holdings of the world’s largest gold-backed ETF rose nearly 5 tonnes on Thursday. Data from the fund showed that inflows for the year moved to 151 tonnes versus 52 tonnes in the same period last year.

Fed Chair Janet Yellen emphasized in her testimony before Congress in February that further rate hikes by the Fed will be data-driven. If this is the case then today’s jobs data indicates the Fed will likely pass on a rate hike in March and perhaps June.

Today’s jobs report was not impressive enough for investors to believe the Fed will raise rates over the near-term. The strong gains reported by the Labor Department on Friday, however, suggest that the U.S. employment surge in February was strong enough to ease fears that the economy was heading into a recession.

Non-Farm payrolls increased by 242,000 jobs last month, trouncing the estimate of 195,000. The unemployment rate held at an eight-year low of 4.9 percent even as more people piled into the labor force. The data was not strong enough to warrant a Fed rate hike over the short-run, but it did confirm that the central bank is not far off in its assessment of the economy.

The Fed is trying to be patient at this time. While investors may be focusing on the headline number, the central bank is watching Average Hourly Earnings. This number came in at -0.1%, missing the estimate of 0.2% and last month’s reading of 0.5%. To put it another way, average hourly earnings actually declined for the month, falling 3 cents and equating to a 2.2 percent annualized jump, down from 2.5 percent in January. The Fed policymakers are looking at wages for signs of inflation.

In other news, a gauge showing those not actively looking for a job or part-time work fell to 9.7 percent, the lowest reading since May 2008. The labor participation rate rose in February to 62.9 percent, its highest level since January 2015, as the civilian labor force increased by 555,000. This indicates that the economy has improved enough or wages have moved up enough to encourage some people to get off their couches to begin looking for work.

Today’s jobs report also featured a pair of significant revisions. December NFPs were adjusted upward from 262,000 to 271,000 and January pushed up to 172,000 from 151,000.

Today’s jobs report triggered a mixed reaction in the markets. The U.S. Dollar declined, helping to drive up gold. The EUR/USD posted a strong gain, but the GBP/USD traded lower. Crude oil was underpinned by the jobs report, but gains were offset by persistent worries about growing inventories in an oversupplied market.