Gold aims for best week in almost two months, despite strong jobs numbers taking a little wind out of the metal’s sails. Investors increasingly expect the Federal Reserve to pause its series of interest rate hikes to curb inflation which is giving the metal its drive.
Nonfarm payrolls in May increased by 339,000, better than the 190,000 forecast. While the unemployment rate rose to 3.7% in May against the estimate for 3.5%. May’s jobless rate was the highest since October 2022. Gold slipped about $6 an ounce, but then began climbing back.
Gold lost some of its luster for haven investors who had flocked to it during the recent political standoff over the debt ceiling which has now resolved.
August gold futures rose 0.7% Thursday to settle at $1,995.50 an ounce on Comex. U.S. financial markets were closed Monday for the Memorial Day holiday, so there was no settlement. The front-month contract advanced 1.7% so far this week. Bullion retreated 0.9% in May after increasing 0.6% in April and 8.1% in March. The metal fell $2.40 in 2022. The August contract is currently down $3.6 (-0.18%) an ounce to $1991.90 and the DG spot price is $1968.90.
Philadelphia Fed President Patrick Harker said Thursday that the central bank should “at least skip” a rate hike in June, though he acknowledged that inflation is slowing “at a disappointingly slow pace.”
Fed policymakers have indicated that they closely follow both inflation and labor market data when determining monetary policy. Higher interest rates are typically bearish for gold because they make the yellow metal less attractive as an alternate investment, but a pause or an end to the rate hikes would be bullish.
Private payrolls rose more than economists expected in May, with the ADP employment report data Thursday showing a gain of 278,000 for the month. That exceeded economists’ expectations of 180,000 and the revised April print of 291,000. The figures signaled that the labor market may be resisting recession fears. But U.S. weekly initial jobless claims for last week rose slightly.
U.S. inflation measured by the personal consumption expenditures price index, the Fed’s favorite inflation measure, bounced higher in April, data released last week showed.
About 72.5% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep interest rates unchanged at the next meeting June 14, while 27.5% expect the central bank to raise rates by another 25 basis points. A week ago, most investors were expecting rates to go up.
The Fed raised rates by another 25 basis points last month. The Fed has raised rates by 25 basis points three times this year following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November 2022. The federal funds rate is currently at 5.00% to 5.25%.
In other news, the U.S. Senate passed a bill to raise the U.S. debt ceiling, sending the legislation that would avert a default on $31.4 trillion in U.S. debt to President Joe Biden, who is expected to sign it into law. A previous standoff among lawmakers over raising the debt ceiling drew haven investors to gold.
July silver futures rallied 1.7% Thursday to settle at $23.99 an ounce on Comex. The front-month contract rose 2.7% so fa this week. Silver decreased 6.5% in May after gaining 4.4% in April and 15% in March. It rose 3% in 2022. The July contract is currently up $0.028 (+0.12%) an ounce to $24.015 and the DG spot price is $23.80.
Spot palladium increased 2% Thursday to $1,411.00 an ounce, though it’s down 2.8% so far this week. Palladium fell 9.3% last month after rising 2% in April and 3.7% in March. Palladium lost 5.7% in 2022. Currently, the DG spot price is up $30.80 an ounce to $1441.50.
Spot platinum gained 1% Thursday to $1,014.70 an ounce, though it’s down 1.6% this week. Platinum retreated 7.4% in May after adding 8.5% in April and 3.7% in March. Platinum surged 10% in 2022. The DG spot price is currently up $4.00 an ounce to $1018.10.
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