Gold price shoots higher on US labor data disappointment

Spot gold rose 1.7% to $1,757.38 per ounce by 11:55 a.m. EDT, its highest level in more than a week. US gold futures gained 2.1% to trade at $1,760.30 per ounce in New York.

Still, gold is on course for its biggest monthly loss since June, with precious metals pressured by the prospect of a pullback in stimulus measures by the Federal Reserve.

The latest labor data shows that applications for US state unemployment benefits unexpectedly rose for a third straight week, led by another surge in California. The dollar fell after the report, boosting bullion’s appeal for investors holding foreign currencies.

A worsening labor market could push the US central bank to delay reducing stimulus, which cushioned the economy from the worst effects of the pandemic and sent bullion prices to a record last year.

“This is also leading to uncertainty about Fed tapering because they want a strong job market to announce a tapering,” independent consultant Robin Bhar told Reuters, adding that any delay could be positive for gold.

Gold is also “running into some renewed physical buying, with some investors looking to hedge against the economic uncertainty, rising inflation”, Bhar said.

However, Exinity chief market analyst Han Tan warned that heightened prospects for Fed tapering, widely expected to start in November and chances of Treasury yields continuing to gain are all expected to heap more pressure on zero-yielding gold.

Bullion “really depends on the dollar and yields now,” said Daniel Pavilonis, senior market strategist at RJO Futures, in a Bloomberg note.

The precious metal and silver are also helped by “some short covering” after a selloff Wednesday, he added.