Gold heads for first weekly drop in four after the minutes of the Federal Reserve’s December meeting were released on Wednesday, reducing expectations that interest rate cuts were imminent and strengthening the dollar and Treasury yields. The yellow metal dropped briefly on this morning’s positive jobs numbers, but rebounded quickly.
U.S. jobs ended 2023 on a high note. December’s jobs report showed employers added 216,000 jobs, easily beating the forecast of a 170,000 job gain. The unemployment rate held at 3.7%, slightly better than the estimated 3.8%. Average hourly earnings rose 0.4% on the month and were up 4.1% from a year ago, both higher than the respective estimates for 0.3% and 3.9%. The DG spot price briefly dropped $14 an ounce on the news, but swiftly rebounded. The Fed has said it closely watches both labor markets and inflation data when determining monetary policy. Higher interest rates are typically bearish for gold, making the yellow metal less attractive as an alternate investment. Conversely, rate cuts are seen as bullish for gold.
Front-month gold futures rose 0.4% Thursday to settle at $2,050.00 an ounce on Comex, though the February contract is down 1.1% in a shortened week of trading. Markets were closed Monday for New Year’s Day. Bullion gained 0.7% last month after rising 3.2% in November and increasing 6.9% in October. The metal rose 13% in 2023. Gold hit a record peak last week and is likely poised to test new records in 2024. The February contract is currently up $2.20 (+0.11%) an ounce to $2052.20 and the DG spot price is $2049.00.
Fed policymakers saw interest rates staying high “for some time,” according the minutes, released Wednesday. At the same time, officials indicated that they were probably at the peak of the interest rate cycle and that cuts would begin this year.
“Participants generally stressed the importance of maintaining a careful and data-dependent approach to making monetary policy decisions and reaffirmed that it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably toward the committee’s objective,” the minutes said.
The Fed minutes bolstered the dollar, and Treasury yields were heading for their best week since October. Strength in these assets typically pressures gold.
Also weighing on gold were a couple of strong labor market reports Thursday. Private payrolls added 164,000 job sin December, beating expectations, according to the ADP National Employment Report. U.S. weekly initial jobless claims data for last week showed that applications for new unemployment benefits fell to a two-month low, even though demand for workers has been easing.
The CME FedWatch Tool shows that 97.4% of the investors it tracks are betting that the Fed will keep its federal funds rate unchanged at 5.25% to 5.50% in January, while 2.6% are expecting a 25 basis point cut, fewer than just a day earlier. But that changes in March, with the central bank widely expected to cut, with another reduction expected in May.
The Fed has raised interest rate cuts by 5.25 percentage points since March 2022 to curb inflation. The Fed has said it closely watches inflation and labor market data when determining monetary policy.
Front-month silver futures edged up 0.1% Thursday to settle at $23.19 an ounce on Comex, though the March contract is down 3.7% so far this week. Silver dropped 6.1% in December after advancing 12% in November and increasing 2.2% in October. It ticked up 0.2% in 2023. The March contract is currently up $0.028 (+0.12%) an ounce to $23.215 and the DG spot price is $23.12.
Spot palladium fell 2.9% Thursday to $1,048.50 an ounce and has decreased 6.1% so far this week. Palladium advanced 8.6% in December after losing 9.5% in November and dropping 10% in October. Palladium plummeted 38% last year. The current DG spot price is Down $3.30 an ounce to $1042.50.
Spot platinum lost 2% Thursday to $961.70 an ounce and is down 3.6% this week. Platinum rose 8.1% in December after falling 0.7% in November and gaining 3.5% in October. Platinum is dropped 6.8% in 2023. Currently, the DG spot price is up $6.00 an ounce to $969.30.
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