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Gold price rises as US jobs data eases pressure on Fed

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Gold extended gains after a jobs report showed more Americans are coming back to the labor market, a welcome sign for the Federal Reserve as it tries to cool inflation.

Spot gold rose 1.0% to $1,713.20 per ounce by 11:40 a.m. ET, though it remains on track for a third straight weekly loss. US gold futures were up 0.9% to $1,725 per ounce in New York.

Meanwhile, the dollar retreated following the latest US jobs data, which fell mostly in line with expectations. US non-farm payrolls rose 315,000 last month, slightly higher than the median economist estimate.

The increase in non-farm payrolls was broadly in line with expectations “and therefore doesn’t add much pressure on the US Federal Reserve to raise rates faster than the market already expected,” Capital Economics commodities economist Edward Gardner said in a message to Bloomberg.

“The gold price rose slightly on the news as the data release reduces the risk of faster-than-expected rate hikes going forward, which would raise the opportunity cost of holding gold,” Gardner added.

“The jobs numbers were very close to market expectations. The market is deeming it as a goldilocks number as it doesn’t suggest weakness, but is not too strong to prompt an even more aggressive Fed,” said Jim Wyckoff, senior analyst at Kitco Metals, in a Reuters report. “Gold is kind of seeing a relief-short covering rally.”

“A slightly weaker US dollar and US short-term Treasury yields have given gold some relief recently. However, this has not changed the underlying downward trend in gold prices,” said analyst Piero Cingari.

On the technical front, prices need to break above the trendline from the March peak, currently at $1,770, before signalling a recovery, Saxo Bank analyst Ole Hansen said in a note.

Attention will now turn to the central bank’s meeting later in September. Bullion has fallen for five consecutive months on expectations the Fed will keep interest rates high for some time, undermining non-yielding assets like gold.

(With files from Bloomberg and Reuters)