Gold aims for the biggest weekly jump in two months on hopes the Fed will pause its series of interest rate increases and amid uncertainty over a worsening U.S. banking crisis. However, the bullion’s momentum took a dip this morning on U.S. job statistics, backing off from near record levels.
Job growth in April proves better than expected despite bank issues and a decelerating economy, per the Labor Department. Friday’s Nonfarm payrolls report shows an increase of 253,000 for the month, handily beating the forecast of 180,000. Average hourly earnings rose 0.5% for April and jumped 4.4% from a year ago, both higher than expected. Unemployment is at its lowest point since 1969.The Fed has said it closely considers labor market conditions and inflation data when making monetary policy decisions. Gold dropped over $30 an ounce on the report.
The central bank raised rates by another 25 basis points Wednesday. 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.
“Support for the 25-basis-point increase was very strong across the board,” Fed Chairman Jerome Powell said after the meeting Wednesday. “People did talk about pausing but not so much at this meeting,” he said, adding that the Fed is “much closer to the end of this than to the beginning.”
June gold futures rose 0.9% Thursday to settle at $2,055.70 an ounce on Comex, and the front-month contract gained 2.8% so far this week. Bullion increased 0.6% in April after gaining 8.1% in March. The metal fell $2.40 in 2022. Currently, the June contract is down $36.9 (-1.80%) an ounce to $2018.80 and the DG spot price is $2009.20.
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%. The European Central Bank also raised rates by 25 basis points Thursday.
About 96.1% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep interest rates unchanged at the next meeting in June, while just 3.9% expect another 25 basis point rate hike.
Heightened concerns about the U.S. banking sector have also triggered speculation that the Fed may have to cut interest rates sooner than previously anticipated, however. Shares of regional U.S. banks have tumbled following the recent collapse of multiple banks. In the latest development, reports emerged Wednesday that PacWest was exploring strategic options. The crisis is bullish for gold because it adds to the metal’s safe haven appeal.
July silver futures rose 2.1% Thursday to settle at $26.23 an ounce on Comex. The front-month contract advanced 4% in the first four days of the week. Silver gained 4.4% in April after increasing 15% in March. It rose 3% in 2022. The July contract is currently down $0.447 (-1.70%) an ounce to $25.780 and the DG spot price is $25.47.
Spot palladium increased 1.7% Thursday to $1,473.50 an ounce, and it’s down 3.3% so far this week. Palladium rose 2% last month after rising 3.7% in March. Palladium lost 5.7% in 2022. Currently, the DG spot price is up $9.40 an ounce to $1481.00
Spot platinum lost 1.8% Thursday to $1,045.00 an ounce and is down 3.7% this week. Platinum added 8.5% in May after increasing 3.7% in March. Platinum surged 10% in 2022. The DG spot price is currently up $4.30 an ounce to $1053.60.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.