Gold futures headed for the biggest gain in 11 weeks after the U.S. economy added fewer jobs in May than forecast, weakening the case for the Federal Reserve to raise interest rates.

The addition of 38,000 workers, the fewest since September 2010, followed a 123,000 advance in April that was smaller than previously estimated, a Labor Department report showed Friday.

The increase in May was less than the most pessimistic forecast in a Bloomberg survey.

Bullion is coming off of its biggest monthly loss since November after signs of an improving U.S. economy spurred speculation that the Fed could tighten monetary policy as soon as this month. Higher rates curb bullion’s appeal against interest-bearing assets. Those bets retreated on Friday, with the odds of a June rate rise dropping to 4 percent, from 30 percent a week ago, according to Fed funds futures.

“It’s a pretty bad number,” Bob Haberkorn, a senior market strategist at RJO Futures in Chicago, said in a telephone interview, referring to the jobs report. “It takes the Fed rate increase pretty much off the table for June.”

Gold futures for August delivery jumped 2.1 percent to $1,238.30 an ounce at 8:48 a.m. on the Comex in New York. A close at that price would mark the biggest gain since March 17.

Last week, Fed Chair Janet Yellen suggested an increase in rates would be appropriate if economic growth picks up and the labor market continues to improve.

Eoin Treacy's view

Today’s weak jobs number suggest the Fed may have to pause and wait for more data before raising rates. This is particularly true since today’s number is so much less than expected. A point Jeff Gundlach made at his talk last week was that every central bank that has tried to raise rates since the financial crisis has had to reverse course and it is too early to say whether the Fed will have to do the same.

US 10-year yields pulled back to test the lower side of the three-month range today and the medium-term downward bias remains intact. A sustained move above the trend mean will be required to question medium-term demand dominance but with the psychological 1.5% level is close proximity a pick up in volatility is looking increasingly likely.

The Dollar Index responded aggressively and pulled back emphatically, confirming resistance in the region of the trend mean with a clear downside weekly key reversal. A sustained move above the MA will now be required to signal a return to Dollar pre-eminence.


That acted as a catalyst for precious metals with both gold and silver bouncing from the region of their respective 200-day MAs.

The NYSE Arca Gold BUGS Index rebounded emphatically from the 200 area

Following a multi-year decline precious metals are not expensive, even after a major short-term move from early in the year. However the broader point is that if one wants an insurance policy against central bank experiments with extraordinary monetary policy in all its forms then gold is not a bad place to start especially with so much sovereign debt at negative yields. $7.8 trillion at the last count.