Gold Prices Recover
Gold prices began to recover as they made gains on Friday after the metal hit its lowest price mark in weeks. After this week’s U.S. Federal Reserve meeting renewed confidence in the U.S. economy, gold prices plummeted. The announcement by the Fed spurred on gains by the U.S. dollar and in government bonds, which often have an inverse relationship with the value of gold.
The market seems to be correcting itself, however, as gold gained slightly and the Greenback weakened. Still, even with the recovery, the loss of value in May is bringing gold prices down to their lowest level since the beginning of the year. Gold is currently trading at $1,227 an ounce.
Government data was also recently released which showed that 211,000 people found new jobs in April. This represented a recovery in job creation, as early spring had displayed weak numbers. The unemployment rate was also good news for the U.S. economy, coming in at 4.4%, down from 4.5%. That’s good for a new post-recession low. (Source: “Gold prices poised for largest weekly loss of the year,” MarketWatch, May 5, 2017.)
Labor market data is often important to gold bugs, as it is one of the economic reports most closely followed by the Fed, which then uses that information to determine the next step for monetary policy, including setting the all-important interest rates.
As it stands, a large part of what caused gold bullion to plummet was the Fed’s positivity in relation to the U.S. economy, which has led many analysts to believe that June is almost certainly to see an interest rate hike coming from the central bank.
The cooling of international political tensions, as well as the end of the French election—which is set to conclude this weekend—also hurt gold prices. That’s because precious metal often finds itself as a risk asset of choice for investors in order to ward off economic woes aggravated by political uncertainty.