'Bubble-Like' Gold and Silver Sink on US Jobs Surprise as 'Distrusted' Dollar Bounces

GOLD and SILVER sank at the start of New York trading on Wednesday, accused of risking a "bubble" by one major US bank and reversing earlier strong gains for the day after January's US jobs report snapped a run of poor data from the world's largest economy.

The Dollar leapt on the currency market, spiking from a 1-week low on its DXY index against other rich-economy currencies − and regaining almost ¥0.1 against the Chinese Yuan − as the Bureau of Labor Statistics said non-farm payrolls added almost twice as many jobs as analysts forecast last month, with wage growth accelerating as the unemployment rate unexpectedly fell to a 5-month low.

But that still left the US currency close to end-January's 4-year lows on the DXY index, and it had hit a new 33-month low versus the CNY overnight.

The Dollar then eased back, while gold and silver rebounded again to reach $5070 and $85 per Troy ounce respectively.

Both levels were new all-time highs for the 'hard money' precious metals only last month.

"The sharp rally in gold over the last three months has come with increasing instability," says analysis from giant US finance group Bank of America, pointing at its Bubble Risk Indicator.

"There are other assets showing bubble-like dynamics too, including silver, the Korean Kospi index and rare earth stocks. A common driver behind all of these price moves is Dollar weakness...[but] we think part of the narrative is overblown.

"Despite uncertainty and policy changes, the relative outperformance of the US economy shows no signs of cracking. There are limits to how much [Dollar] depreciation could take place [from here], not least because monetary policy abroad would react to it."

Gold and silver prices lost 1.2% and 2.5% respectively within 60 seconds of today's stronger-than-expected US jobs data.

While betting on the Federal Reserve's monetary policy already saw 'no change' before June's decision, the odds of a cut at that month's meeting meanwhile sank from 75% to barely 60% according to the CME derivatives exchange's FedWatch tool.

Today's jobs surprise came after what the Financial Times calls a "string of bleak data" starting a week ago with the lay-off specialists Challenger, Gray & Christmas reporting the steepest New Year jobs cuts since the recession of 2009.

"The much worse than expected US retail sales yesterday suggest that brick wall in consumer spending has now been hit," says economist Albert Edwards at French bank SocGen.

This evening will bring the US federal government's budget balance for January, with consumer price inflation due Friday.

Friday will also bring end-2025 economic growth and jobs data from the 21-nation Eurozone, where the European Central Bank has now kept interest rates at a 3-year low since June.

Gold priced in the Euro today hit a 1-week high close to €4300 per Troy ounce before trading back at €4270 following the US jobs data.

The UK gold price in Pounds per ounce meanwhile hit a 2-week high at £3738 before pulling back to £3700.

"This round of Yuan appreciation is unlike any previous episode," says analysis from Shenzhen-based investment bank Citic Securities, because it's driven by rising FX use of the Chinese currency worldwide, plus "mounting global distrust of the US Dollar".