Stronger-than-expected job growth pressures gold

Market expects less dovish stance from the Federal Reserve

By Farah Mourad | 7 June 2024

Market close
  • USD Strengthened following the robust employment report

  • Despite strong job growth, the unemployment rate rose slightly to 4.0%

  • No change in the People’s Bank of China gold reserves from April to May

US Employment Data Overview

The US non-farm payrolls report for May 2024 revealed a stronger-than-expected increase in employment, with 272,000 jobs added, significantly surpassing the anticipated 185,000. The previous month's figures were revised down slightly from 175,000 to 165,000.

Key Details:

  • Non-Farm Payrolls (May): 272,000 (vs. 185,000 expected)
  • Unemployment Rate: 4.0% (vs. 3.9% expected, prior 3.9%)

Despite the rise in the unemployment rate to 4.0%, the overall employment data was robust, showing significant job growth and higher wages.

Market Reaction:

  • US 10-Year Treasury Yield: Increased by 12 basis points to 4.402%, reflecting market expectations of a less dovish stance from the Federal Reserve in their upcoming meeting.
  • USD Performance: Strengthened following the report.
  • US Index Futures: Declined due to the hawkish implications of the employment data.
  • Fed Rate Cut Probability: The probability of a rate cut in September dropped to around 55%, down from about 70% before the report's release.

Canada Employment Data Overview

Canada's employment change for May 2024 showed an increase of 26,700 jobs, which was slightly above the expected 22,500. However, this was a noticeable decline from the prior month's robust gain of 90,400 jobs.

Key Details:

  • Employment Change (May): 26,700 (vs. 22,500 expected, prior 90,400)
  • Unemployment Rate: 6.2% (consistent with expectations, prior 6.1%)

Gold Market Reaction

Following the release of the US non-farm payrolls data, gold prices experienced a decline. The higher-than-expected employment numbers exerted downward pressure on gold, which was already trending lower due to data showing no change in the People’s Bank of China’s reserves from April to May. The gold market remains volatile, exhibiting sharp fluctuations in the short term.