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Gold price down despite unprecedented US job cuts

The Golden Statue of Prometheus near the Rockefeller Center in New York. Credit: Pixabay

Gold prices saw a slight decline on Friday even as it was revealed the US job market experienced its worst downturn in history.

According to latest data released by the US Bureau of Labor Statistics, employers cut an unprecedented 20.5 million jobs during the month of April, sending unemployment rate to 14.7% — its highest since the Great Depression.

However, that figure still fell short of the estimated 22 million jobs that could be lost, restoring a modicum of optimism among equity investors.

While spot gold fell 0.8% to $1,706.73 an ounce by 1 p.m EST on Friday, it is still headed for a 0.3% weekly gain. Gold futures were down 0.6% on the Comex in New York to $1,714.20 an ounce.

The precious metal has outperformed most major asset classes so far, benefitting from stimulus measures and periods of low borrowing rates.

“The initial takeaway is that the unemployment rate was less bad than the expectations,” says Naeem Aslam, chief market analyst at Ava Trade. “The initial move in the gold price was to the downside but one needs to keep in mind that the US unemployment rate is incredibly high.”

“Now that the number wasn’t as bad as expected, gold’s just taking a breather,” says Phil Streible, chief market strategist for Blue Line Futures LLC.

Gold has come under pressure during the month as government officials push for their respective economies to reopen and gradually return to normalcy, weakening the rationale to invest in safe haven assets like the bullion.

However, money continued to flow into the gold market, with holdings in gold-backed ETFs reaching a new record high in April. Despite the high market volatility, the price of gold remained above $1,700 an ounce in the second half of the month.