The price of gold experienced a notable surge on last Friday in response to the release of the US Nonfarm Payrolls (NFP) report, which revealed weaker-than-expected job growth for April. According to data from the Bureau of Labor Statistics, the report indicated that 175,000 new jobs were added to the economy, falling short of the forecasted 243,000 and below the upwardly revised 315,000 from the previous month.
Additionally, Average Hourly Earnings figures came in softer than anticipated, showing a year-on-year increase of 3.9% and a month-on-month increase of 0.2%, compared to expectations of 4.0% and 0.3% respectively. This slowdown in earnings growth suggests easing inflationary pressures, potentially increasing the likelihood of earlier interest rate cuts by the Federal Reserve (Fed).
The expectation of lower interest rates weighed on the US Dollar (USD), leading to a decline of over half a percent in the US Dollar Index (DXY) following the release of the report.
Further details from the NFP report showed a decrease in Average Hours Worked to 34.3 from 34.4, likely reflecting an uptick in part-time employment, which is often viewed negatively by economists.
Despite the disappointing employment figures, the Unemployment Rate ticked down to 3.9% from 3.8% previously, although no change had been forecasted. The participation rate remained unchanged at 62.7%.
In addition to the NFP data, the US ISM Services Purchasing Managers’ Index (PMI) for April also showed a steeper decline than expected, dropping to 49.4 against the forecast of a rise to 52.0 from the previous reading of 51.4. The Services sector’s performance is critical for interest rate considerations, as it has been identified as a source of potential wage inflation, influencing monetary policy decisions aimed at controlling interest rates.
