Gold Climbs On US Jobs Report Miss

Gold has been on a wild ride over the last few months. After climbing through the most part of the new year.  The price of the precious metal recently started to see big declines as the US economy started to show strong inflation. However, data that was released earlier today has sent the value of gold back on the upward trend. Today, we'll talk about the data that sent the value of gold skyrocketing; Why the US economy plays such a major role in the value of the precious metal, and what we can expect to see in the price of gold moving forward.

US Jobs Report Was A Miss

As mentioned above, recent economic data earlier this week sent the value of gold tanking in the market. However, earlier today, new economic data caused the precious metal to skyrocket. That data surrounded jobs growth in the United States.

The US jobs report released this morning proved to be an incredibly worrisome signal for the United States economy. In the month of May, the United States only added 38,000 jobs to its economy. This is a horrible sign for the state of the US economy. After all, when economic conditions are positive, corporations tend to hire more. In the United States, the economic conditions are considered to be doing well when the economy adds 200,000 jobs consistently on a monthly basis. While experts were expecting for the figure to fall short of the 200,000 mark for May, it even fell well below the 162,000 job additions experts were expecting to see.

What Does This Have To Do With The Price Of Gold

While it may seem as though jobs growth in the United States and gold have nothing to do with one another, that's not the case at all. The truth is that like most commodities, gold is priced using the United States dollar. And let’s face it, all currencies are heavily dependent on the economies they represent. When positive economic conditions are released in the United States, the USD tends to climb in value. This makes gold more expensive around the world, and causes declines in demand. Adversely, when negative news is released, we tend to see declines in the USD. This makes gold cheaper around the world, leading to increases in demand and increases in price.

However, this time around, gold is seeing a much larger gain than it normally would. The reason for this falls back to the Federal Reserve. When a report was released showing strong inflation in the month of April, investors started to expect that the Fed would increase its interest rate at the FOMC meeting in June. This would have caused the USD to gain substantially. However, an interest rate hike depends on strong economic conditions. Because that's not what we're seeing, it's now likely that the Fed will hold off on a rate hike, leading to declines in the USD. This will ultimately cause the value of gold to climb.

What We Can Expect To See Moving Forward

Moving forward, I maintain my bullish opinion with regard to gold. The reality is that the precious metal is a safe haven investment. Therefore, poor economic conditions and poor market conditions tend to cause long run gains in the demand for and price of the precious metal. Looking around the global market and economy, it's clear to see that conditions aren't positive. While a global financial reset, as some would claim is happening, may be long off, conditions are concerning to say the least. Consequently, I'm expecting safe haven demand for the precious metal to remain strong at least through this year. This should lead to more price gains the reminder of the year. 

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