Gold-related exchange traded funds surged Friday after updated employment data revealed employers in May added the fewest workers in almost six years, fueling speculation the Federal Reserve may push off an interest rate hike this month.
On Friday, the SPDR Gold Shares (NYSEArca: GLD) rose 2.4% and VanEck Vectors Gold Miners ETF (NYSEArca: GDX) jumped 8.9%.
Investors also capitalized on the advance through leveraged options, with the Direxion Daily Gold Miners Bull 3x Shares ETF (NYSEArca: NUGT) up 26.4% and ProShares Ultra Gold Miners (NYSEArca: GDXX) up 17.7% on Friday.
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Meanwhile, gold futures were 2.4% higher to $1,241.5 per ounce.
Gold rallied following the poor May jobs report. Nonfarm payrolls increased by only 38,000 last month, the smallest increase since September 2010, reports Lucia Mutikani for Reuters.
Moreover, the Labor Department revealed employers hired 59,000 fewer workers in March and April than previously expected.
“This is not a good report, and it may well give Fed officials second thoughts about increasing interest rates again this month or next, as some have suggested lately,” Peter Ireland, an economics professor at Boston College, told Reuters.
[related_stories]The Federal Reserve previously signaled it would raise rates soon if the employment situation improved and economic data remained consistent with a pickup in growth.
Related: Low-Rate Environment Will Help Support Gold ETFs
With a Fed rate hike in doubt, precious metals-related assets surged Friday. An extended low-rate environment would help support gold, which pays its holders nothing and struggles to compete with yield-bearing assets if borrowing costs rise, as a more stable store of wealth, and a depressed U.S. dollar would also make USD-denominated gold cheaper for foreign buyers.
“There’s been a lot of bullish money on the sidelines … that has been worried about the Fed,” Bob Haberkorn, senior market strategist at RJO Futures, told the Wall Street Journal. “They’ve been lying in the weeds and waiting. It feels like it’s coming out this morning.”
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VanEck Vectors Gold Miners ETF