Gold edges back above $2,300

Gold edges back above $2,300

Gold edges back above $2,300 as traders look toward the Federal Reserve’s policy announcement later today at the end of the central bank policymakers’ two-day meeting. The yellow metal boosted a bit this morning on positive jobs numbers.

Private payrolls grew in April at a faster-than-expected pace according to ADP. The payrolls processing firm reported Wednesday that 192,000 workers were added for the month, beating the Dow Jones forecast of 183,000 but down from March’s upwardly revised 208,000 total. While worker pay was up 5% from a year ago, that is a multiyear low, providing a bit of welcome inflation news.

The yellow metal pared a monthly rally at the end of April as the timeline of an anticipated Fed interest rate cut was pushed back following a series of economic reports, including a higher-than-expected inflation report last week. The Fed’s statement Wednesday afternoon and subsequent remarks from Fed Chair Jerome Powell will be closely parsed for signals on the central bank’s next moves. High interest rates are typically considered bearish for gold, making it a less attractive investment than assets like the dollar and Treasurys. 

Front-month gold futures fell 2.3% Tuesday to settle at $2,302.90 an ounce on Comex, and the most-active June contract lost 1.9% in the first two 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 July contract is currently up $9.80 (+0.43%) an ounce to $2312.70 and the DG spot price is $2303.80.

Traders in the stock options market are expecting the biggest move in the S&P 500 on a Fed announcement day since 2023, Bloomberg reported, citing Citi. A big move in equities could turn gold into a haven investment against the volatility. But a large rally in stocks could also dull the yellow metal’s attractiveness as an alternate investment.

Much of Europe, Asia and Latin America are closed Wednesday for the global Labor Day holiday, potentially reducing trading volumes and exacerbating the potential for market volatility. U.S. markets are open, however. 

About 99.1% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged on Wednesday, while 1.0% expect a 25 basis point rise. More than 90% of investors also expect the Fed to hold rates at current levels in June. The figures are more than 75% in July and more than 50% in September. 

The Fed kept rates unchanged at 5.25% to 5.50% at its previous meeting but has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation. It was seen as nearly ready to start cutting rates until the recent economic reports. Now, most investors aren’t expecting a rate cut until November at the earliest.

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. 

In addition to the Fed statement, economists and investors will be closely watching key U.S. jobs reports for April. The U.S. monthly employment report from the Labor Department comes out Friday and the U.S. weekly initial jobless claims report is scheduled for release on Thursday. 

July silver futures decreased 3.7% Tuesday to settle at $26.65 an ounce on Comex, and the front-month contract fell 3.2% in the first two 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 up $0.066 (+0.25%) an ounce to $26.720 and the DG spot price is $26.53.

Spot palladium dropped 2.2% Tuesday to $967.00 an ounce but is up 0.2% 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 down $2.80 an ounce to $958.00.

Spot platinum lost 1.9% Tuesday to $943.10 an ounce, but was up 2.4% in the first two 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 up $12.20 an ounce to $957.40 .

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