By Barani Krishnan
Investing.com - Good job numbers are killing gold longs' hopes for a rate cut.
A stellar U.S. employment report for June reset market expectations for a Federal Reserve interest rate reduction later this month, sending both bullion and futures of gold skidding on Friday to below the key $1,400 level.
Spot gold, reflective of trades in bullion, traded at $1,398.26 an ounce by 1:20 PM ET (17:06 GMT), down $17.08, or 1.2%, on the day. Bullion earlier peaked at $1,424.24. It fell nearly 1% on the week for its first weekly loss in seven.
Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, traded at $1,399.75 an ounce by 1:20 PM ET (17:06 GMT), down $21.20, or 1.5%, on the day. It earlier peaked at $1,426.65. August gold also fell nearly 1% on the week, its steepest decline in three weeks.
The U.S. added 224,000 jobs in June versus a forecast growth of 160,000. While unemployment is still at a near 50-year low, Friday's jobs growth was still the highest in five months.
Investing.com's Fed Rate Monitor Tool still suggests a 100% chance the Fed will cut its key federal funds rate from 2.25%-2.5% to 2%-2.25% at its July 30-31 meeting. Yet, some market participants were scaling back expectations that the rate cut is a certainty. Stocks on Wall Street fell soon after the open, although losses were cut substantially by early afternoon.
"There are still some doubts among market commentators about a July cut," said Fawad Razaqzada, technical analyst for precious metals and currencies at FOREX.com.
"They will be wondering now whether the rebound in employment growth has reduced the need for a rate cut in July, especially in light of trade talks between the US and China resuming. We think not." But, he added, next week's Consumer Price Index report and the European Central Bank's July 25 meeting could change matters.
If the ECB chose to cut rates unexpectedly at its meeting, then the Fed could follow, Razaqzada said, "regardless of any further improvement in US data in the interim."