Gold hits record high on jobs data

Gold hits record high on jobs data

Gold hits record high over $2180 an ounce on mixed jobs data, heading for the biggest weekly rally in five months, as investors react to the key U.S. jobs report for February.

Job growth topped expectations in February, pointing to a still-vibrant U.S. labor market while the unemployment rate rose. Nonfarm payrolls rose 275,000 for the month topping the forecast of 198,000. The jobless rate moved higher to 3.9%, even though the labor force participation rate held steady at 62.5%. Average hourly earnings, watched closely as an inflation indicator, showed a slightly less than expected increase for the month and a deceleration from a year ago. Resilience in the labor market will bolster the case for a rate cut.

The yellow metal had touched a record high of $2,164.09 in the previous session following testimony before Congress from Federal Reserve Chairman Jerome Powell that solidified expectations of pending interest rate cuts in the next few months. Lower interest rates are considered bullish for the yellow metal, making it a more attractive asset for investors. Gold also has support from haven demand related to the conflict in the Middle East. 

Front-month gold futures rose 0.3% Thursday to settle at $2,165.20 an ounce on Comex, and the most-active April contract gained 3.3% during the first four days of the week. Bullion dropped 0.6% in February after declining 0.2% in January and gaining 0.7% in December. The metal rose 13% in 2023. The April contract is currently up $13.70 (+0.63%) an ounce to $2178.90 and the DG spot price is $2166.10.

Powell said Thursday that Fed policymakers were “not far” from having the confidence to implement interest rate cuts as inflation moves toward the central bank’s 2% target.  

“I think we are in the right place,” he said Thursday in testimony before the Senate Banking Committee. “We are waiting to become more confident that inflation is moving sustainably down to 2%. When we do get that confidence, and we’re not far from it, it will be appropriate to begin to dial back the level of restriction so that we don’t drive the economy into recession.”

The Fed closely tracks both labor market and inflation data when determining monetary policy.

Earlier this week, the ADP employment report showed that private payrolls rose by 140,000 last month, up from an upwardly revised 11,000 in January but slightly lower than the 150,000 estimate by economists surveyed by Dow Jones. U.S. weekly initial jobless claims reported by the Labor Department were unchanged for last week. 

The Fed’s favorite inflation measure, the personal consumption expenditures price index, came in in line with economists’ estimates last week. Excluding volatile food and energy costs, so-called core-PCE increased 0.4% month on month in January and 2.8% from a year earlier. Top-line PCE, including food and energy costs, increased 0.3% for the month and 2.4% on a 12-month basis. 

About 95% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged this month, while 5% expect a 25 basis point cut. Most investors tracked by the tool also anticipate the Fed will hold rates steady at the following policy meeting in May. Most are now looking to June for a rate cut. 

The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% at its last meeting. 

Front-month silver futures rose 0.4% Thursday to settle at $24.58 an ounce on Comex, and the May contract rallied 5.2% in the first four days of the week. Silver lost 1.2% in February after falling 3.8% in January and dropping 6.1% in December. It ticked up 0.2% in 2023. The May contract is currently up $0.022 (+0.09%) an ounce to $24.600 and the DG spot price is $24.33.

Spot palladium decreased 0.3% Thursday to $1,052.00 an ounce but is up 8.7% so far this week. Palladium fell 4.6% in February after tumbling 11% in January and advancing 8.6% in December. Palladium plummeted 38% last year. Currently, the DG spot price is up $11.10 an ounce to $1057.50.

Spot platinum advanced 0.9% Thursday to $925.60 an ounce and is up 3.9% so far this week. Platinum decreased 4.9% in February after falling 8% in January and rising 8.1% in December. Platinum dropped 6.8% in 2023. The DG spot price is currently down $2.30 an ounce to $923.10.

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