Gold futures bounced off six-year lows in spite of a strong dollar, as an optimistic U.S. jobs report paved the way for the Federal Reserve to lift short-term interest rates later this month at a highly-anticipated meeting.
On the Comex division of the New York Mercantile Exchange, gold for February delivery traded in a broad range between $1,057.20 and $1,088.20 an ounce before settling at $1,083.40, up 22.20 or 2.09% on the session. With the sharp gains, gold enjoyed one of its strongest one-day move in two months, surging at one point to its highest levels since mid-November. Earlier this week, the precious metal fell to its lowest level since the Financial Crisis after the dollar reached 2015-yearly highs, amid signals of divergent monetary policies between the Fed and the European Central Bank. In spite of Friday's rally, gold is still down approximately 2.5% over the last month of trading.
Gold likely gained support at $1,046.20, the low from Dec. 3 and was met with resistance $1,110.70, the high from Nov. 7.
On Friday morning, the U.S. Department of Labor reported that non-farm payrolls in November increased by 211,000 on a monthly basis, above consensus estimates for gains of 190,000. It followed a robust report a month earlier when nonfarm payrolls surged by 271,000, placing a December rate hike by the Fed squarely on the table. There were further indications of strength in the labor market on Friday when the Bureau of Labor Statistics upwardly revised the October reading by 27,000 to 298,000.
Fed chair Janet Yellen sent further hints that the U.S. central bank will raise rates in less than two weeks with hawkish comments at two closely-watched public appearances earlier this week. While testifying before the Joint Economic Committee on Capitol Hill on Thursday morning, Yellen said the economy needs to add fewer than 100,000 jobs a month to absorb the losses of those who fell out of the labor market in recent years.
Even before Friday's release, data indicated that the U.S. labor market added more than 200,000 monthly jobs on average this year. The unemployment rate in November held steady at 5.0%, while average hourly earnings ticked up by 0.2%. Hourly wages, which have been persistently sluggish throughout the year, were expected to increase between 0.1 and 0.3% on the month. The average workweek per all U.S. employees remained unchanged at 34.5 hours.
The U-6 unemployment rate, a broader measure of labor underutilization, inched up 0.1 to 9.9%. The rate, which measures workers that are marginally attached to the market, as well as workers that are not currently looking for employment, stood at 11.4% last year at this time. By comparison, the rate peaked at above 17% during the Great Recession. The measure is a preferred gauge by Yellen, as the chair of the Federal Reserve weighs the nation's employment outlook.
Although Yellen indicated in a speech on Wednesday before the Economic Club of Washington that U.S. inflation remains well-below the Fed's targeted goal, she emphasized that the Fed has seen considerable improvement in the economy and labor market. While Yellen sent strong signals that the Fed could be on the verge of approving its first rate hike in nearly a decade, she noted that unforeseen economic and financial developments over the next few days could sway its decision.
A rate hike is viewed as bearish for gold, which is not attached to interest rates and struggles to compete with high-yield bearing assets. Still, commodity traders have had more than a month to price in a rate hike, as a host of Fed members telegraphed the increasing likelihood of lift-off throughout November.
Investors also reacted to OPEC's decision on Friday to leave its production ceiling unchanged at a contentious meeting in Vienna. As a result, crude prices are expected to remain stubbornly low amid a glut of oversupply on global energy markets.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, jumped more than 0.75% to an intraday high of 98.62. A day earlier, the dollar suffered its worst loss against the euro in six years. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for March delivery soared 0.458 or 3.25% to 14.535 an ounce.
Copper for March delivery gained 0.018 or 0.89% to 2.079 a pound.