The May job report dumbfounded economists who had forecast a job loss of 8 million in May as the COVID-19 pandemic rattled parts of the U.S. economy negatively for a third straight month.
Gold traders rushed for the exits after they were stunned by the robust nonfarm payroll report,” said Ed Moya, analyst at New York’s OANDA told Reuters.
“It will be hard for the Fed to remain extremely accommodative if the world’s largest economy is already in recovery mode,” he added.
Why invest in gold? Humans mainly use gold for making jewelry, physical coins, and recently, for industrial purposes such as in the production of electronics.
However, it is rare enough that many people don’t have it, or have it in minute quantities. Humans are emotionally and physically drawn to gold. It provides a significant store of value.
Investors buy gold to hedge against inflation.
In addition, America’s Federal Reserve, the Congress, and U.S. Treasury have collectively approved and disbursed trillions of dollars in outright aid to businesses, and grants and loans to individuals in recent weeks because of the COVID-19-triggered economic downturn.
“I expect a return by next week to the basics of global economic recovery, before more headlines on Middle East worries, China-U.S. tariffs, debt and creeping — not negative interest rates — give gold a leg up,” said George Gero, managing director in charge of the precious metals portfolio at RBC Wealth Management in New York.
Moya added that, “Gold might not get much more support from the Fed, but geopolitical risks, second wave concerns, and an eventually weaker U.S. dollar should keep the longer-term bullish outlook intact.”