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May 7 2015, 08.20am GMT


On Wednesday, gold futures dropped slightly ending a 2nd day rally, while disappointing US jobs predictions painted a grim outlook for the critical nonfarm payroll report due Friday.

Gold futures on Wednesday dropped slightly ending a rally that lasted for two days, as disappointing US jobs expectations paint a dim outlook for the critical nonfarm employment report due on Friday.

On the New York Mercantile Exchange’s Comex division, gold futures for June delivery dropped 3.80 or 0.32% to 1,189.40. Rising to a session high, gold was at 1,196.90 after the jobs release in morning trade before marking a daily-low drop at 1,187.50.

Since the beginning of April, gold futures have stuck to the range of between $1,170 and $1,215 at its highest.

ADP (NASDAQ: ADP), a payroll processing firm, on Wednesday said that private payrolls went up by 169,000 nation-wide for April. This number is just below the 170,000 consensus estimates while private payrolls for March were revised down by 14,000 to 175,000 by ADP.

Nonfarm payrolls saw a small increase to 126,000 on a month-to-month basis in March dropping quickly from a 264,000 increase in the previous month. In March, the unemployment rate remained at 5.5%. The participation rate from the labor force went down 0.1% to 62.7% while the average hourly earnings increased 0.3% from the 0.1% increase in February.

On Friday the Federal Reserve will keep a close eye on the jobs report, as previously stated in the last meeting that they will be taking a data-driven approach for determining the first interest rate increase in almost a decade. Any big improvements in the labor report could see the Federal Open Market Committee push for a June lift-off. But at the same time, if the report illustrates slow job gains, the Fed could be persuaded to postpone the rate increase to September or maybe even December.

Before the jobs report release on Friday, metal traders do not seem over eager to make any sudden moves in either direction.

Interestingly, although gold is not attached to interest rates and dividends, in environments with high interest rates, it struggles against other assets that are high yield-bearers.

In a conference on Wednesday, Janet Yellen, the Chairwoman of the Federal Reserve said that while there are some concerns around financial stability in the equity markets, there are no additional concerns of any possible bubbles forming.

Meanwhile, the US Dollar Index plummeted 1.34% to 93.99 hitting its lowest mark since late February before it rebounded slightly to 94.36.

In other commodity trading, July delivery for Silver dropped 0 0.58% or 0.096 to 16.483 per troy ounce. Also, July delivery for copper fell 0.67% or 0.020 to 2.915 a pound, a day after achieving a yearly high.

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