(Kitco News) – The gold price continues to maintain its grip on support above $1,800 an ounce and is seeing some movement higher as fewer private-sector jobs were created in August, according to the latest numbers from private-sector payrolls processor ADP.
Wednesday, ADP said that 374,000 jobs were created in August, significantly missing expectations. Consensus forecasts were calling for job growth of around 640,000.
The gold market was under modest pressure ahead of the data but has seen a push back to neutral territory. December gold futures last traded at $1,817.50 an ounce, down 0.02% on the day.
According to some economists, a lot of attention is focused on the U.S. labor market as it is a critical element to the Federal Reserve’s expected plan to reduce its monthly bond purchase by the end of the year.
Economists have said that weaker-than-expected job growth could force the U.S. central bank to delay its tapering plans, which some were expecting to be released later this month after the monetary policy meeting.
Although the latest ADP numbers creates some downside risks to Friday’s nonfarm payrolls, economists note that the report has never been a consistent predictor for the official government data.
In a recent report ahead of ADP, commodity analysts at OCBC said that disappointing numbers on Friday could be the catalyst that propels gold prices higher.
“We expect gold to possibly head towards $1830 in the near term if the rally continues and possibly to $1900 if this Friday’s job report disappoints,” the analysts said.
Andrew Hunter, senior U.S. economist at Capital Economics said that he still expects Friday’s jobs report to show strong growth in the labor market.
“Admittedly, the details show that the slowdown in private employment growth over the past couple of months has been driven mainly by leisure & hospitality, education & health and ‘other services,’ which would be consistent with the idea that rising virus fears are prompting consumers to avoid high-contact services again. That said, the high-frequency activity indicators and the initial jobless claims data suggest there has only been a modest slowdown in the pace of recovery, although the sharp declines in measures of consumer confidence are a little more disconcerting,” he said in a note.
However, Hunter added that even if Friday’s jobs report comes in stronger-than-expected it still doesn’t guarantee that the Federal Reserve is ready to release a detailed plan to reduce its bond purchases.
“The lingering uncertainty posed by the Delta variant suggests that an announcement at the early November meeting, is now marginally more likely,” he said.