Weak jobs data pushes gold price higher

Gold prices rose on Friday afternoon due to a disappointing jobs data from the United States. In the month of May, only 138,000 new jobs while analysts were expecting job growth of 181,000. The price of gold rose by 0.8% and is at $1,277 per troy ounce at the time of writing, the highest level in five weeks.

The disappointing jobs data has once again raised doubts about the strength of the US economy. It could also have consequences for the Federal Reserve's interest rate policy, as the central bank is strongly influenced by developments in the US labour market.

Officially, unemployment in the United States is very low, but behind these statistics there is a huge hidden unemployment. For example, more than 90 million Americans in the unemployed workforce are no longer counted as unemployed, and there are still more than 40 million Americans who use food stamps to make ends meet.

Gold price rises after disappointing jobs data

Federal Reserve interest rate hike

Nevertheless, the consensus among analysts is still that the US central bank will raise interest rates again on June 14, but the chance that a third rate hike will follow by the end of this year is estimated at less than 50%. In theory, higher interest rates are negative for gold, but in recent years we have seen the opposite happen. The price of gold fell in the run-up to the interest rate hike, only to rise again after the official announcement.

The poor jobs figure from the United States is also having an effect on the US dollar. Last year there was still talk of a flight towards the dollar, but in recent months the euro seems to be regaining some ground. This is partly due to the ebbing of the political risks that were on the calendar at the beginning of this year.

According to commodity analyst Ole Hansen of Saxo Bank, the gold price could rise further to $1,300 per troy ounce if the price can stay above the $1,280 mark. He gave the following explanation to Kitco:

"The story of the strong dollar is dying a slow death and that's a good thing for gold. Gold will continue to do well as the market is no longer pricing in a third rate hike this year. Gold prices could rise to $1,300 per troy ounce as weakness in the dollar lays a strong foundation for new buying."

Upward trend for precious metals

The Gold price in dollars , next week could also get a boost from the ECB's interest rate decision on Thursday. There are calls to taper the €60 billion-a-month stimulus programme, which will further strengthen the euro against the dollar.

The weaker dollar isn't just pushing up the price of gold. Silver and palladium also increased in value, with the latter precious metal even reaching its highest level in two years. Palladium is predominantly used in the automotive industry, but is also attracting more attention from investors due to the rising price.