Gold Fell On Recession Fears

Gold Fell On Recession Fears

Gold fell early Monday as heightened speculation that interest rate increases by the world’s central bankers to combat runaway inflation drove recession fears. The bullion was further stalled by a stronger dollar that is sparking off of Friday’s healthy U.S. jobs data that points to the Fed sticking to its aggressive rate hike plan.

While Western investors are selling their bullion, Asian buyers are rushing to buy cheaper jewelry and gold bars, Bloomberg reported.

Front-month gold futures rose 2.2% last week to settle at $1,709.30 an ounce on Comex, though the December contract fell 0.7% Friday. Bullion fell 3.1% in September and 7.5% in the third quarter. The metal is down 6.5% this year. The current December contract is down $27.40 (-1.60%) an ounce to $1681.90 and the DG spot price is $1678.90.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.21% Friday to 944.31 metric tons, Reuters reported.

A report Friday showing a decline in the U.S. unemployment rate last month is likely to keep Federal Reserve policymakers on track with a series of interest rate increases. The Fed has raised interest rates by 300 basis points so far this year, with 75 basis points increases each in June, July, and September. The next meeting is in November.

New York Fed President John Williams said Friday that interest rates need to rise to 4.5%, but the pace – and the ultimate peak – of the rate hikes will depend on economic performance. 

U.S. unemployment fell to 3.5% last month, though jobs growth slowed, coming in below economists’ expectations. Also last week, a report showed that U.S. manufacturing grew at it slowest pace in two and a half years in September.

September consumer price index data are due out Thursday, and a series of Fed officials are scheduled to speak throughout the week. Minutes of the last meeting of Fed policymakers come out Wednesday. Inflation tracked by the personal consumption expenditures price index, the Fed’s favorite inflation measure, was stronger than analysts had expected in August, according to data released last week.  

Investors are betting there’s a 78.1% chance of a 75-basis-point rate increase at the next meeting of Fed policymakers in early November, with 21.9% projecting a 50-basis-point hike, according to the CME FedWatch Tool. A week ago, just 56.5% of investors anticipated a 75-basis-point increase, with 43.5% predicting a 50-basis-point hike. 

Front-month silver futures gained 6.4% last week to settle at $20.26 an ounce on Comex, though the December contract dropped 2% Friday. Silver advanced 6.5% in September and fell 6.5% in the third quarter. It’s down 13% this year. The December contract is currently down $0.450 (-2.22%) an ounce to $19.805 and the DG spot price is $19.87

Spot palladium increased 0.4% last week to $2,217.50 an ounce, though it tumbled 3.2% Friday.  Palladium gained 5.9% last month and 13% in the third quarter. It’s up 16% in 2022. Currently, the DG spot price has leapt up $55.70 an ounce to $2267.00.

Spot platinum advanced 6.1% last week to $925.70 an ounce, though it slipped 0.7% Friday. Platinum rose 2.6% in September. It fell 4% in the third quarter and is down 4.9% this year. The DG spot price is down $7.50 an ounce to $917.40.

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