Weak US jobs data pulls gold off its lows and cools bets on more Fed rate hikes

The US economy added only 57,000 jobs in June, well below the roughly 110,000 to 115,000 that economists had forecast. Revisions also cut a combined 74,000 from the April and May figures, according to Bloomberg. The weak report changed how traders judged the Federal Reserve's next move. Futures markets lowered the probability of a further increase this year to about 75.6 percent from roughly 84 percent, and analysts said a rate increase at the Fed's July meeting was now hard to justify.

Gold rose as expectations for policy eased. It climbed back above $4,100 an ounce and traded near $4,180 on Friday, up about 1.3 percent on the day, recovering from a low it had reached earlier in the week. That earlier decline came as investors worried that the Federal Reserve under its new chair, Kevin Warsh, would favor higher rates. Treasury yields fell and the dollar weakened. US stocks had risen after the data, with the Dow Jones Industrial Average gaining 256 points, or 0.49 percent, though US markets were closed on Friday ahead of the Independence Day holiday.

The same shift appeared on other exchanges. In Tel Aviv, local commentators noted that the expectation of an eventual rate cut helped limit declines, even after US technology shares had fallen sharply the day before. Analysts at CNBC said weaker hiring, combined with easing oil prices, strengthened the case for the Fed to hold rates steady rather than raise them further.

For those who favor sound money, the episode is a reminder that an interest rate set higher than the real economy can sustain is eventually challenged by data that force investors to reassess. When the labor market weakens, the case for holding cash weakens with it, and demand tends to rise for assets that central banks cannot create, such as gold.