Gold Leaps to 6-Week High After June Jobs Report

If you are looking for a new job, the latest U.S. employment report won’t come as a surprise. It is getting harder to find a new job.

Spot gold jumped to over $2,300 an ounce—a six week high— following the June jobs report, which painted a decidedly weaker-than-expected economic picture, and boosted odds that the Federal Reserve will cut rates twice in 2024.

Silver prices also rose on the news, trading over $31.00 an ounce. The U.S. dollar fell to a three-week low following the jobs report, which makes gold less expensive for foreign buyers of the precious metal.

Mid-Year Report Card on the Jobs Market? Thumbs Down

In June, the overall unemployment rate rose to its highest level since late 2021 at 4.1%. And, while U.S. non-farm payrolls grew by 206,000 in June, big downward revisions to March and April job growth numbers show the labor market is cooling and reveal a worrisome trend.

When you remove new government jobs created in June, private payrolls grew by only 136,000. Key takeaway? Be skeptical when the jobs market growth is largely supported by new government jobs.

Digging into the details, job growth numbers for April and May were revised down a big 111,000 meaning that jobs rose only 108,000 in April and 218,000 in May.

For perspective, with the newly reported revisions, jobs growth over the last three months averaged 177,000, which is down from a 249,000 three-month average in the prior month.

Three Strikes and You Are Out

The increase in the unemployment rate to 4.1% in June follows a rise in May from 3.9% to 4.0%. If there is another increase in the unemployment rate in July, one of the best available recession indicator’s known as the Sahm Rule will start flashing red.

Former Fed economist Claudia Sahm developed this rule, which is based on the idea that, when people start losing jobs, they cut back on spending, and this in turn causes even more job losses throughout the economy. It technically is triggered when the unemployment rate rises to at least half a percentage point above its low point from the past year, which is the signal that a recession has begun.

Will Gold’s 2024 Rally Continue?

Gold has gained over 12% since the start of the year and Wall Street analysts say more record highs are on the way. The gold market’s reaction after the employment report was a bullish signal and opens the door to a new all-time record high later this year in the $2,538-$2,643 area, according to a BofA Global Research report. Investors are piling into precious metals to protect and grow their wealth. If you act now, you can trade your dollars for gold before the next big upswing begins.

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