Gold futures tumbled on Friday, Gold Coin Premiums Narrow as Jobs Data Supports Rate Hike
Gold recorded a hefty loss on Friday, closing down 1.7%, its worst one-day drop since May 24, as the Labor Department’s jobs report supported a Fed rate hike.
Gold recorded a hefty loss on Friday, closing down 1.7%, its worst one-day drop since May 24, as the Labor Department’s jobs report supported a Fed rate hike. Over the week, the price of gold fell approximately 1%, but the metal is still having a good year and is up about 26%. If the Fed does move to hike rates in the second half of the year, after the run-up the metal could be prone to a correction.
The Fed used the dismal May jobs report as reason to hold-off on another rate hike, and since the May jobs report there has been other, mixed economic data which the Fed used as reason to stand put, especially considering the overseas economic volatility. But, on Friday when the Labor Department reported a solid July jobs report it showed that despite other indications that the US economy is having some challenges, that the jobs market remains strong. The Fed considers the state of the US jobs market as one of the most important factors to consider in deciding when to increase interest rates. Now, the sentiment is that a rate hike is possible as early as September.
American Eagle Gold Coin spot premiums also narrowed significantly compared to last week when the coins were selling for over $60 over spot. This week the premium fell to $51, although it seems a large swing, the $51 premium is more in line of where premiums have been, recently. Last week they jumped on the sentiment that the Fed would hold off on an interest rate hike, which made investors more interested in physical gold as a store of wealth to guard themselves from ultra low-interest rates. This sentiment completely reversed this week as a result of the jobs data.