Risk aversion sweeps in! Stronger-than-expected non-farm payrolls can't stop the surge in gold
Gold prices continued to rise under the influence of risk aversion, closing up 0.9% on Friday, with a cumulative increase of 2.4% for the week, reaching $2,708.50 per ounce. Despite the release of strong U.S. non-farm payroll data and a drop in the unemployment rate to 4.1%, market expectations for a Federal Reserve interest rate cut have not diminished. Analysts point out that gold's strong performance reflects investors' concerns about debt levels, market valuations, and geopolitical uncertainties, highlighting gold's appeal as a safe haven
According to the Zhitong Finance APP, gold prices rose further on Friday, marking a strong end to the week, as the uncertainty surrounding the policies of U.S. President-elect Trump triggered safe-haven demand, despite strong U.S. employment data reinforcing expectations that the Federal Reserve may not significantly cut interest rates this year. Comex near-month gold futures closed up 0.9% on Friday, rising 2.4% for the week to $2,708.50 per ounce; near-month silver futures closed up 1% on Friday, rising 4.3% for the week to $31.091 per ounce.
The report showed that U.S. non-farm payrolls increased by 256,000 in December, far exceeding market expectations, while the unemployment rate unexpectedly fell to 4.1%. Following the release of the employment report, gold prices jumped, and the U.S. dollar index also rose, with the yield on 30-year U.S. Treasury bonds surpassing 5% for the first time in over a year.
Alex Ebkarian, Chief Operating Officer of Allegiance Gold, stated, “The rise in gold prices following the strong employment report seems counterintuitive, as strong employment data typically means a stronger dollar and rising yields, which are unfavorable for gold. This reaction highlights the general unease among investors—it reflects deeper concerns about structural issues such as unsustainable debt levels, overvalued market valuations, and geopolitical uncertainty.”
Ole Hansen, Head of Commodity Strategy at Saxo Bank, remarked, “Considering the stronger dollar and rising bond yields, the resilience of gold is impressive,” indicating that gold is “driven by other factors such as trade wars, inflation concerns, and fiscal debt worries.”
Financial markets expect the Federal Reserve to cut rates as early as June, marking the end of the rate-cutting cycle.
Brien Lundin, editor of the Gold Newsletter, stated, “The stronger dollar, rising U.S. Treasury yields, and increasing gold prices are all evidence of global concerns about the U.S. fiscal situation.”
Lundin noted that gold is “the ultimate safe haven, and thus more and more investors are buying gold, from central banks to individual investors... Despite the headwinds of rising yields and a stronger dollar, gold's performance is impressive,” and this performance may continue