Gold prices push above $4,200 as ADP says 44k jobs created in July

(Kitco News) – The gold market is adding to its overnight gains, pushing to session highs above $4,200 an ounce as the U.S. economy created fewer private-sector jobs than expected in July, according to private-sector payroll processor ADP.

On Wednesday, ADP announced that 44,000 jobs were created last month. The report came in below expectations, as consensus forecasts called for job gains of 68,000.

At the same time, the report noted a jump in wage inflation.

“Job-changers are highly sensitive to real-time economic conditions, and their rapid pay growth implies supply constraints in parts of the labor market. Typical hiring patterns, meanwhile, are changing as employers react to shifting macroeconomic conditions,” said Dr. Nela Richardson, Chief Economist at ADP, in the report.

The gold market is seeing solid momentum in its initial reaction to the disappointing labor market data. Spot gold last traded at $4,210.50, up more than 3% on the day. The precious metal has added to its significant overnight gains.

Waleed Said, Technical Analyst at GivTrade, said that the latest employment data continues to show that momentum in the U.S. labor market has shifted, which should provide solid support for gold.

“Gold’s initial reaction to the upside is mainly based on the fact that the Fed has been pushed into a corner to support the job market, as this is part of its primary mandate. But traders should remember that this is only half of the picture, as the big number is coming on Friday, which is going to bring the real fireworks,” he said.

Some analysts note that the latest employment data puts the Federal Reserve in a difficult position because wage inflation is pushing higher even as labor market growth slows.

The report said that annual wages for workers who stayed in their jobs increased 4.4% last month, unchanged from June. However, workers who switched jobs saw their annual pay increase 7%, up from 6.6% in June.