By Barani Krishnan

-- As those in the gold market began Friday’s trading, the ominous question was whether the yellow metal’s prices will survive another wrecker-ball of a U.S. jobs report?

While any crystal ball divination on gold should be taken with a grain of salt, Friday’s performance of both futures on New York’s Comex and bullion in the aftermath of the U.S. nonfarm payrolls report for July suggested that longs in the game might not get crushed yet.

U.S. employers added 528,000 jobs last month, according to the report that smashed economists’ forecasts for an addition of just 250,000 posts — making the Federal Reserve’s already arduous task of curbing inflation even harder.

Yet gold, which typically encounters a meltdown in any situation that calls for stiff Fed rate hikes — and a U.S. jobs report that’s more than twice stronger than forecast certainly qualifies as one of those situations — held relatively well under the circumstances.

After tumbling to an intraday low of $1,780.30 — which was still higher than Thursday’s bottom — the benchmark gold futures contract on New York’s Comex, December, settled down just a notch above that, at $1,780.50, down $15.70, or 0.9%. For the week, Comex gold was basically flat.

The spot price of bullion, more closely followed than futures by some traders, was at just below $1,775, down nearly $17, or almost 1%, on the day.

One reason for gold surviving the jobs report was probably that neither the U.S. dollar nor Treasury bond yields — which together are the biggest beneficiaries of any Fed rate hike — rallied too much on Friday.

The Dollar Index, which pits the greenback against six majors led by the euro, hit a one-week high of 106.81.

On the yields front, the benchmark 10-year Treasury note hit a two-week high of 2.87%.

“The next couple of weeks will truly test if gold is a safe-haven again,” said Ed Moya, analyst at online trading platform OANDA. “Bullion traders now have two big questions: How much higher will the Fed take rates? Can gold rally alongside a strengthening dollar?”

The Fed has already hiked interest rates four times since March, bringing key lending rates from nearly zero to as high as 2.5%. It has another three rate revisions left before the year is over, with the first of that due on September 21.

Until the jobs report released on Friday, expectations had been for a 50 basis point hike in September. Now, money market traders are pricing in a 62% chance of a 75-basis point hike for next month — the same as in June and July.

The labor market has been the juggernaut of the U.S. economy, powering its recovery from the 2020 coronavirus outbreak.

Unemployment reached a record high of 14.8% in April 2020, with the loss of some 20 million jobs after the COVID-19 breakout. Since then, hundreds of thousands of jobs have been added every month, with the trend not letting up in July despite a negative 0.9% growth in second-quarter gross domestic product this year, after a minus 1.6% in the first quarter that together accounted for a recession.

As thankful as the Biden administration and economic policy-makers at the Fed are for such jobs resilience, the runaway labor market — and associated wage pressures — has been a headache to monetary authorities fighting the worst U.S. inflation since the 1980s.

Hourly wages have risen month after month since April 2021, expanding by a cumulative 6.7% over the past 16 months, or an average of 0.4% a month.

Inflation, measured by the Consumer Price Index, meanwhile expanded by 9.1% in the year to June, its highest in four decades. The Fed’s tolerance for inflation is a mere 2% per year, some 4-1/2 times less than the current CPI reading.