GOLD WEEKLYThe latest US labor market data presents a mixed picture for the Federal Reserve's interest rate path and gold prices.
Labor Market Analysis
Average Hourly Earnings (0.4% m/m vs. 0.3% forecast):
Wage growth accelerated, surpassing expectations and the prior month's 0.2%. This raises concerns about persistent inflationary pressures, as higher wages often translate to increased consumer spending and business cost passthroughs.
Non-Farm Employment Change (139K vs. 126K forecast):
Job gains exceeded estimates but fell short of the previous 147K. This suggests moderate labor market resilience without overheating.
Unemployment Rate (4.2% steady):
Stability at this level indicates a balanced labor market, reducing urgency for immediate Fed action.
Fed Policy Implications
The strong wage growth reinforces hawkish concerns about inflation persistence, potentially delaying rate cuts. However, the mixed jobs figure (above forecasts but below prior) and stable unemployment rate give the Fed room to maintain its current 4.25%–4.50% target range. Markets will watch for:
Confirmation of wage-driven inflation in upcoming CPI/PCE reports
Whether job growth stabilizes or continues decelerating
Gold Price Outlook
Short-term pressure: Rising wage inflation reduces expectations for near-term rate cuts, boosting Treasury yields and the dollar. This creates headwinds for gold, which struggles against higher opportunity costs.
Long-term support: If wage growth sustains negative real interest rates (inflation > nominal rates), gold could rebound as a hedge. Current projections suggest real rates may remain negative through 2025.
Key Scenarios
Wage growth persists Delayed rate cuts Downward pressure
Job growth slows sharply Earlier dovish pivot Rally above supply roof
Inflation moderates Status quo Range-bound trading
The Fed will likely maintain rates in June while emphasizing data dependency. Gold's trajectory hinges on whether wage trends validate stagflation fears or show signs of moderation. Traders should monitor July's jobs report and Q2 inflation data for clearer directional bias.
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