Gold prices closed in on their all-time high Friday morning before erasing their sizable gains as dismal nonfarm employment data showing a significant cooldown in the labor market contributed to erratic trading.
The yellow metal was on track to notch its best week in four months and had crossed $2,470 per ounce – cornering its record all-time high price of $2,482.97 per ounce set on July 17 – before tumbling back down to $2,434 per ounce, losing $9.96. It was the same story for silver, which initially soared on the unemployment data to $28.80 per ounce, then dipped into negative territory with a loss of $0.28 to trade at $28.23 per ounce.
Unemployment Figures Causing Market Volatility
The volatile action was driven by data from the U.S. Bureau of Labor Statistics showing the unemployment rate rose to 4.3% in July – its highest level since October 2021 – with an addition of 114,000 jobs. The number of unemployed people increased by 352,000 to 7.2 million – higher than a year earlier, when the jobless rate was 3.5%, with 5.9 million people unemployed.
The figure came in way under Wall Street projections of 185,000 jobs added and also triggered a recession red flag known as the Sahm Rule, which holds that a recession is most likely underway if unemployment rises by half a percentage point from the low of the past year.
Additionally, the BLS reported the change in total nonfarm payroll employment for May was revised down by 2,000 jobs, from 218,000 to 216,000, and the change for June was revised down by 27,000, from 206,000 to 179,000.
With these revisions, the bureau said that employment in May and June combined was 29,000 lower than previously reported.
Market Response and Implications
The downbeat labor report also caused both a slide in Treasury yields and the dollar, offering further support for gold. Escalating tensions this week in the Middle East conflict continue to play a role as well.
One additional insight is that investors may view gold as a safe-haven asset during times of economic uncertainty, which could explain the initial surge in gold prices despite the negative economic data. Additionally, revisions in employment data could lead to increased market volatility as investors try to adjust their positions based on the new information.
