Gold breaches $1,250/oz, Yellen calls US jobs report ‘disappointing’

Gold futures extended to a two-week high on Monday afternoon in the US after investors turned more bullish in the aftermath of poor US data.

Gold for August delivery on the Comex division of the New York Mercantile Exchange edged up $4.60 or 0.4 percent to $1,247.50 per ounce. Trade has ranged from $1,242.10 to $1,251.30.

Comex copper for July settlement inched up 0.7 cents or 0.3 percent to $2.1200 per pound. Trade has ranged from $2.1160 to $2.1450.

Speaking in Philadelphia today, Federal Reserve chairwoman Janet Yellen described the latest US employment report as “disappointing” and “concerning” – the labour market grew at the slowest pace last month since September 2010.

But she warned observers not to overemphasise one data point over such a short period, reiterating that the US economy continues to show strong signs of growth.

“One should never attach too much significance to any single monthly report,” Yellen said. “I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones.”

Gradual rises in interest rates would be appropriate if the underlying conditions are met, she said, but she did not list exactly what those would be outside of the Fed’s dual mandate of full employment and steady inflation.

The report was especially significant ahead of the Fed’s two-day meeting from June 14 due to increased hawkish rhetoric – including from Yellen herself – following the release of the April meeting minutes, which showed a majority of US central bankers are growing comfortable with a rise this summer.

But after the release, only six percent of investors expect the Fed to move in a fortnight while only roughly a third are pricing in a July move, according to CME Group FedWatch.

“In other words, rate hike expectations are essentially back at their mid-May level before the publication of the Fed meeting minutes caused them to rise,” Commerzbank said. “At that time, gold was trading at $1,280 per ounce. Against this backdrop, gold thus has further upside potential.”

In paper gold, exchange-traded funds (ETFs) tracked by FastMarkets surged over the weekend – 7.25 tonnes of inflows lifted total holdings to a new yearly high of 1,910 tonnes overall.

Meanwhile, in a light data day, the US labour market conditions index tumbled to -4.8, missing the -0.8 expectation and its lowest mark since June 2009.

Turning to US markets, the Dow Jones industrial average and S&P were up 0.6 percent and 0.4 percent respectively while the dollar was 0.1 percent stronger at 1.1357 against the euro.

As for other precious metals, Comex silver for July delivery rose seven cents or 0.4 percent to $16.435 per ounce. Trade has ranged from $16.365 to $16.545.

Platinum for July settlement gained $10.50 or 1.1 percent to $992.40 per ounce while palladium at $555.50 was up $6.15 or 1.1 percent.

(Editing by Mark Shaw)