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James Hyerczyk
Gold Futures

Gold futures are edging lower early Friday as investors await the release of the June U.S. Non-Farm Payrolls report at 12:30 GMT. Position-squaring ahead of the report is limiting the price action, but giving the market an early downside bias is a stronger U.S. Dollar and firming U.S. Treasury yields. However, weaker demand for risky assets may be helping to limit losses.

At 08:37 GMT, August Comex gold futures are trading $1416.50, down $4.00 or -0.28%. Despite the early weakness, the market is in a position to post its seventh consecutive weekly gain.

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U.S. Non-Farm Payrolls Report

Traders expect U.S. Non-Farm Payrolls to show the economy added 162,000 jobs in June. In May, the economy added 75,000 jobs, well below the forecast. U.S. private payroll employment is expected to show an increase of 90,000 from the previous month, according to a Reuters poll. On Wednesday, an ADP Non-Farm Employment Change report showed the private sector added 102,000 jobs. This came in below the 140,000 estimate.

Average Hourly Earnings are forecast increasing 0.3% after gaining 0.2% in May. That would lift the annual increase in wages to 3.2% from 3.1% in May, which was the slowest rise in eight months. The average workweek is expected to have been unchanged at 34.4 hours in June for a third straight month.

The unemployment rate is expected to have remained near a 50-year low of 3.6% in June for a third straight month. However, the jobless rate could surprise on the upside as a survey last week showed consumers less upbeat in their perceptions of the labor market this month.

Daily Forecast

Evidence that headline payrolls rebounded in June along with wage gains is not likely to be enough to discourage the Federal Reserve from cutting interest rates later in the month amid growing evidence the economy is slowing.

The recent price action indicates that traders expect at least a 25-basis point rate cut by the Fed. So a steady-to-slightly weaker jobs report is likely already priced into the market. A big miss by the report could put a 50-basis point rate cut back on the table. This could be bullish for gold prices.

On June 25, Fed Chair Jerome Powell and St. Louis Fed President James Bullard dampened the chances of a half-point rate cut, but extremely weak data could increase its chances again. This would weaken the U.S. Dollar and drive up demand for dollar-denominated gold.

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