Gold briefly rises on U.S. jobs report

Gold briefly rises on U.S. jobs report

Gold briefly rises on sluggish U.S. jobs report for April, but then lost altitude as equities lured investors. Gold appears headed for its first back-to-back weekly loss since February on concerns that the Federal Reserve will take longer than previously expected to cut interest rates because of high inflation.

The U.S. economy sparked fewer jobs than forecast for April and the unemployment rate rose per the Labor Department’s Bureau of Labor Statistics Friday report. Both numbers raising hopes that the Fed will cut interest rates in the coming months. Nonfarm payrolls rose by 175,000 on the month, well below the 240,000 Dow Jones estimate, while the unemployment rate ticked up to 3.9% against expectations it would hold steady at 3.8%. The report raised the prospect of a “Goldilocks” climate where growth continues but not at such a rapid pace to force the Fed to tighten policy further.

Private payrolls increased by a more-than-expected 192,000 in April, according to the monthly report from ADP on Wednesday, and U.S. weekly initial jobless claims held at a low level last week in data from the Labor Department on Thursday. Fed closely watches both labor market and inflation data when setting monetary policy. 

The Fed kept rates unchanged at 5.25% to 5.50% at its meeting Wednesday but has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation. Fed Chair Jerome Powell also said the next change to interest rates is likely to be a cut, not a rise, as some people had feared after recent inflation reports. The comment triggered a brief rally in stocks and drop in Treasury yields on Wednesday. 

Front-month gold futures fell $1.40 Thursday to settle at $2,309.60 an ounce on Comex, and the most-active June contract lost 1.6% in the first four days of the week. Bullion gained 2.9% in April after rising 8.9% in March – the biggest monthly gain in more than three years – and dropping 0.6% in February. The metal rose 13% in 2023. The June contract is currently down $22.30 (-0.97%) an ounce to $2287.30 and the DG spot price is $2285.10.

Powell said it will probably take longer for inflation to drop enough to warrant an interest rate cut in comments after the Fed meeting Wednesday, but he didn’t offer a timeline. 

“I don’t know how long it’ll take,” Powell said regarding when the Fed might have confidence to cut rates. “I can just say that when we get that confidence, then rate cuts will be in scope, and I don’t know exactly when that will be.”

High interest rates are typically considered bearish for gold, making it a less attractive investment than assets like the dollar and Treasurys. 

About 86.5% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in June, while 13.5% expect a 25 basis point cut. While 57% of investors also expect the Fed to hold rates at current levels in July. Most investors don’t expect a rate cut until September. 

The Fed’s favorite inflation measure – the personal consumption expenditures price indexsurpassed economists’ estimates for both the headline and core numbers for March. The Fed’s goal is for 2% inflation. 

July silver futures increased 0.3% Thursday to settle at $26.83 an ounce on Comex, and the front-month contract fell 2.6% in the first four days of the week. Silver rose 7% in April after gaining 8.9% in March and losing 1.2% in February. It ticked up 0.2% in 2023. The July contract is currently down $0.459 (-1.71%) an ounce to $26.370 and the DG spot price is $26.30.

Spot palladium dropped 0.5% Thursday to $949.00 an ounce and is down 1.7% so far this week. Palladium declined 5.9% last month after advancing 7.7% in March and falling 4.6% in February. Palladium plummeted 38% last year. Currently, the DG spot price is up $4.80 an ounce to $952.00.

Spot platinum advanced 1% Thursday to $960.20 an ounce and was up 4.3% in the first four days of the week. Platinum gained 3.1% in April after rising 3.3% in March and decreasing 4.9% in February. Platinum dropped 6.8% in 2023. The DG spot price is currently up $2.60 an ounce to $962.20.

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