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Gold spikes to over 1-month high on NFP data

Monday, July 08, 2024

Today’s headlines

What’s happening: Gold prices recorded gains on Friday, settling at their highest level in over a month.

What happened: The US released its NFP (nonfarm payrolls) report on Friday, which showed a softening in the labour market, fuelling prospects of a rate cut by the Federal Reserve in September.

The US dollar fell to a three-week low versus its peers, providing support to gold prices.

Why it matters: US NFP report showed 206,000 job adds in June, Although the figure topped market expectations of 190,000 job adds, it was lower than May’s reading of 218,000, which was revised lower from 272,000.

The unemployment rate in the US increased to 4.1%, coming in higher than estimates of 4.0%. This marked the first rise in unemployment since November 2021. Average hourly earnings rose by 10 cents, or 0.3%, to $35.00 in June, compared to a 0.4% rise in the earlier month, but below market estimates of 0.4%.

The NFP report triggered speculations of the Fed cutting its benchmark interest rate in September. Traders now widely expect the US central bank to announce another rate cut in December. Lower interest rates decrease the opportunity cost of holding the non-yielding bullion.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, declined to a three-week low after the NFP data release. A lower greenback makes gold less expensive for foreign currency holders. The index fell 0.24% to 104.88 during Friday’s session.

Gold for August delivery gained $28.30, or 1.2%, to settle at $2,397.7 an ounce on Friday, closing at its strongest level since May 21. Prices for the yellow metal added 2.5% last week, notching the strongest weekly surge since the week ending May 10.

In other metals trading, silver for September delivery climbed 85 cents to finish at $31.69 an ounce on Friday, settling at its strongest level since May 17. The white metal ended the week with gains of 7.2%.

September copper rose 12 cents to $4.65 per pound, while platinum jumped to $1,046 per ounce and palladium settled higher at $1,039.60.

What to watch: Investors await the release of inflation data from the US later this week, which is expected to significantly impact gold prices ahead. The annual inflation rate in the US, which eased to 3.3% in May, is expected to decline further to 3.1% in June.

The markets today

The Canadian dollar will be in focus today following the release of jobs data

Context: The CAD/USD forex pair moved lower on Friday amid signs of weakness in the Canadian labour market.

Details: Data released on Friday showed employment in Canada declining by 1,400 in June, compared to a gain of 26,700 jobs in the prior month. The figure came in significant below market expectations of 22,500 job adds.

Canada’s unemployment rate increased to 6.4% in June, from 6.2% in the prior month, reaching the highest level since January 2022. The figure was also worse than market estimates of 6.3%.

This sparked speculations of a rate cut by the Bank of Canada, which weighed on the loonie.

Other data showed the Ivey Purchasing Managers Index increasing to 62.5 in June, compared to the previous month’s reading of 52. The figure also topped market estimates of 53.

Weakness in the price of crude oil, one of Canada’s major exports, also exerted pressure on the Canadian dollar. WTI crude oil for August delivery dipped 72 cents to settle at $83.16 per barrel on Friday.

A decline in the greenback following the release of the NFP report limited the overall losses for the loonie. The US dollar index, which measures the greenback’s performance versus a basket of major peers, declined to a three-week low on Friday.

The CAD/USD forex pair fell around 0.2% to 1.3642 on Friday, after hitting a one-month high of 1.361 on July 4. The S&P/TSX Composite Index fell 0.83% to close at 22,059.03, ending a three-day rally.

What to watch: With no major economic data due on Monday, investors will continue monitoring movements in crude oil prices and the US dollar. Data on building permits from Canada will be released on Friday. The total value of building permits in the country, which jumped by 20.5% to $12.8 billion in April, is expected to decline by 5% in May.

Other Markets: European indices closed mostly lower on Friday, with the FTSE 100, CAC 40 and STOXX Europe 600 Index down by 0.45%, 0.26% and 0.18%, respectively, and the DAX 40 up by 0.14%.

The news shaping the markets

Ukraine’s military troops retreated from the outskirts of eastern Chasiv Yar, after losing further territory to Russia. The news sent RUB/USD higher in forex trading this morning.


Australia’s value of new home loans fell by 2.0% to A$18.13 billion in May. This being lower than market expectations of a 2.0% increase exerted pressure on the AUD/USD forex pair.


Japan’s value of loans surged 3.2% year-over-year in June, compared to a revised 2.9% increase in the prior month. The latest reading also came in better than market estimates of a 3.1% gain, sending the JPY/USD pair higher in forex trading this morning.


Ireland’s BNP Paribas Real Estate Construction PMI fell to 47.5 in June, from 49.8 a month ago. The latest reading signalling a contraction in construction output for the second consecutive month exerting pressure on the EUR/USD forex pair.


China’s foreign exchange reserves shrank by $9.7 billion to $3.222 trillion in June, which sent the CNY/USD pair lower in forex trading this morning.

What else to watch today

Germany’s balance of trade, France’s current account and foreign exchange reserves, Singapore’s foreign exchange reserves, US consumer inflation expectations, Manheim used vehicle value index and total consumer credit, Turkey’s total motor vehicles production and total vehicle sales, as well as Central Bank of Brazil’s focus market readout.


Site by Pink Green
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