Gold Ebbs On Surprising Jobs Data

Gold Ebbs On Surprising Jobs Data

Gold ebbs on this morning’s surprising jobs data, but still aims for its best week in three on the prospect of smaller interest rate increases from the Federal Reserve.

Soaring jobs numbers surprised the markets this morning as investors ponder whether the report will remove some of the Fed’s new cooling toward December rate hikes. Nonfarm payrolls increased by 263,000 in November, well above the estimated 200,000 job gain per the Labor Department. The unemployment rate was inline with expectations at 3.7%. The number that is also raising jitters about Fed’s reation is hourly earnings. The average hourly earnings jumped 0.6% for the month, double the estimate. Gold lost $16 an ounce once the report was released. The Dow dropped over 400 points on the news.

Fed Chairman Jerome Powell signaled Wednesday that the central bank was likely to slow the pace of its interest rate hikes as early as December. The Fed has raised rates by 375 basis points this calendar year to tame 40-year highs in inflation. A key inflation report released Thursday showed the cost of goods cooled in cooled in October, while a separate closely watched report  showed November had the first contraction in U.S. manufacturing since May 2020. Both contributed to the speculation about the Fed’s next actions.

Front-month gold futures rose 3.1% Thursday to settle at $1,815.20 an ounce on Comex, and the February contract is up 2.6% so far this week. Bullion gained 7.3% in November, its first monthly rally since March. The metal is down 0.7% this year. The February contract is currently down $18.5o (-1.02%) an ounce to $1796.70 and the DG spot price is $1785.70.

The Fed’s favorite inflation measure, the personal consumption expenditures price index, posted its second-smallest increase this year in October, according to data from the U.S. Bureau of Economic Analysis. Separately, the Institute for Supply Management reported that its manufacturing index contracted last month after 29 straight months of growth, a sign that the economy is cooling.  

The two reports, combined with Powell’s remarks Wednesday that smaller interest rate increases could begin as soon as this month, fueled speculation that the Fed would indeed begin to taper the size of its rate hikes. The Fed has raised interest rates by 75 basis points each in June, July, September and November. High interest rates are bearish for gold, so the prospect of smaller hikes supported gold prices Thursday.  

Investors are betting there’s a 72.3% chance the Fed will raise interest rates by 50 basis points in December, compared with 51.5% a month ago. About 27.7% of investors tracked by the CME FedWatch Tool are projecting another 75-basis-point hike, compared with 42.2% a month ago. 

Front-month silver futures rose 4.9% Thursday to settle at $22.84 an ounce on Comex. The March contract is up 5.7% this week. Silver increased 14% in November, its biggest monthly gain since December 2020. It’s down 2.2% this year. The March contract is currently down $0.271 (-1.19%) an ounce to $22.570 and the DG spot price is $22.51.

Spot palladium advanced 4.3% Thursday to $1,960.50 an ounce and is up 5.2% this week. Palladium rose 0.3% last month after declining 15% in October. It’s up 2.4% in 2022. Currently, the DG spot price is down $70.80 an ounce to $1895.50.

Spot platinum increased 1.4% Thursday to $1,049.00 an ounce and is up 6.4% this week. Platinum gained 11% in November, its best month since February 2021. It’s up 7.8% this year. The DG spot price is currently down $39.40 an ounce to $1015.50.

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