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James Hyerczyk
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Gold

Gold futures surged on Friday, striking its highest level since February 11, and posting its best weekly performance in six months as a pullback in Treasury yields pushed the U.S. Dollar lower, while driving up foreign demand for the dollar-denominated asset. The catalyst behind the move was a weaker-than-expected U.S. Non-Farm Payrolls report.

On Friday, June Comex gold futures settled at $1831.30, up $15.60 or +0.86%. This was down from a high of $1832.00.

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Yields, Dollar Weaker after US Jobs Data Disappoints

Non-Farm Payrolls increased by only 266,000 jobs last month after rising by 770,000 in March, the Labor Department reported.

Economists polled by Reuters had forecast payrolls advancing by 978,000 jobs. The unexpected slowdown in job growth was likely due to shortages of workers and raw materials as the economy recovers from the coronavirus pandemic.

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Yields Recover After Early Retreat

The benchmark 10-year yield, which dropped to 1.46%, the lowest since March 4, was last up 1.60 basis points on the day at 1.5771%, holding below a 14-month high of 1.776% reached on March 30.

The 30-year yield tumbled to its lowest level since March 1 at 2.158%. It was last 4.4 basis points higher at 2.28%.

The most closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was about 2 basis points steeper at 143.20 basis points.

U.S. interest rate futures indicated that traders pushed out expectations of a Fed rate hike by roughly three months after the payrolls report’s release.

Short-Term Outlook

Despite the impressive rally in gold futures last week, the move may be short-lived since next month’s jobs report could show a huge gain. April’s number may have missed because of labor and raw material shortages that could be cleared up throughout May.

The yield drop was a “knee-jerk reaction” that faded as the session wore on and the market digested the data, according to analysts. You could see that in the gold market on Friday. After the initial reaction to the report and the surge to $1844.60, gold prices drifted lower then became rangebound into the close.

The trend is up and we could still see higher prices over the near-term as long as $1788.50 holds as support.

For a look at all of today’s economic events, check out our economic calendar.
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