NEW YORK (Kitco News) - The latest macro data out of the U.S. pushed gold back to six-month highs after the U.S. economy and employment showed signs of cooling.
The gold market was at one point just $25 away from its key $1,900 an ounce level on Friday, with February Comex gold last at $1,873.40, up 2.4% on the week.
The biggest macro event of the week showed that the U.S. job growth slowed modestly in December, with U.S. nonfarm payrolls rising by 223,000 last month. The November data was revised down to 256,000 positions added.
One of the gold-positive drivers from the report was wage pressures coming down, which is a sign that inflation is cooling. Year-over-year average hourly earnings rose 4.6% last month. This was below markets’ expectations of 5% and followed November’s downwardly revised gain of 4.8%.
“Overall the report showed an economy slowly moderating with inflation coming down and labor market still strong. There is simply nothing recessionary about this report, but it was also a mixed report that had something for everyone,” said MKS PAMP’s head of metals strategy Nicky Shiels.
Also, the U.S. service sector contracted for the first time in 30 months in December, with the Services Purchasing Managers Index (PMI) reading coming in at 49.6%. The 6.9 percentage-point decline surprised to the downside as market consensus calls were looking for the index to come in at 55%.
“While recent tracking suggests that GDP growth held up much better than expected in Q4 last year, this decline in the ISM services will raise concerns that the economy was losing momentum quickly and could have started 2023 on a soft footing,” said CIBC Capital Markets senior economist Andrew Grantham.
Gold surged in response to both data releases, hitting a daily high of $1,875.20 — the highest level since June. “Gold knee-jerked higher,” said Shiels. “The steep declines in business activity and orders that, if sustained, creates concerns about the demand outlook.”