Gold Posts Biggest Weekly Gain Since June as Wages Trim Fed Bets

  • Wages climb at the weakest pace since August, U.S. data show
  • Payrolls jump by 227,000 in January, topping estimates

Gold futures rose, capping the biggest weekly gain in more than seven months, as slower U.S. wage growth eased concern that rising inflation will spur the Federal Reserve to move more aggressively in boosting interest rates.

The jobless rate rose to 4.8 percent and average hourly earnings grew 2.5 percent from January 2016, the weakest since August, a Labor Department report showed Friday in Washington. January’s 227,000 increase in payrolls followed a 157,000 rise in December. The median forecast in a Bloomberg survey of economists called for a 180,000 advance.

Bullion has rebounded in 2017 after the biggest quarterly drop in more than three years, helped by speculation that the Fed will be more cautious in raising interest rates amid uncertainty over the impact of President Donald Trump’s policies. Traders see a 28 percent chance that policy makers will tighten monetary policy in March. That’s down from about 30 percent before the U.S. data was released, Fed fund futures data showed.

“The market is convincing itself that wages aren’t going to become a problem,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said in a telephone interview. “There’s really not a big problem the U.S. central bank needs to fix right now. The gold market is looking at this and saying there’s not a lot pressure to restrict policy at this point.”

Policy makers should be slow to raise interest rates to protect against downside risks to the U.S. economy that might force them to reverse course, Chicago Fed President Charles Evans said Friday in a speech. The central bank held rates steady after a two-day meeting this week.

Gold futures for April delivery added 0.1 percent to settle at $1,220.80 an ounce at 1:37 p.m. on the Comex in New York. The metal climbed 2.5 percent this week, the biggest gain since June 10.

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