Gold holding above $1,800 after dipping slightly on the surprising January jobs report revealing a much stronger economy picture than expected after the omicron wave.
U.S. nonfarm payrolls jumped 467,000 in January, cruising past the 150,000 Wall Street estimate. The biggest gains were in the leisure and hospitality sector, but professional and business services and even retail also posted impressive numbers. Wages also leapt 0.7% for the month and 5.7% for the year. Meanwhile, huge revisions boosted the November and December totals by 709,000.
Now the markets will watch to see the effect of these strong numbers on the Federal Reserve’s monetary policy. The central bank has already indicated that it plans multiple interest rate increases this year, which would likely be bearish for gold.
Front-month gold futures fell 0.3% Thursday to settle at $1,786.60 an ounce on Comex, though the metal rallied 1% in the first four days of this week. Gold dropped 1.8% in January, its worst month since September. It retreated 3.5% in 2021. The April contract is up $5.30 (+0.29%) an ounce to $1,809.40 and the DG spot price is $1,808.80.
While a rate hike is considered bearish for gold, the Fed actions are being driven by high inflation, and gold is a traditional hedge against inflation. The U.S. government’s personal consumption expenditure price index, the Fed’s favored inflation measure, last month posted the fastest year-on-year gain since September 1983. Also keeping a floor under gold prices are the dollar, which is poised for its worst week in two years, and uncertainty over both the tensions between Russia and Ukraine and the state of the pandemic.
But most investors are looking to the Fed and economic indicators for further direction.
Earlier this week, payroll processing firm ADP reported that companies cut jobs in January for the first month in more than a year as the omicron variant of the coronavirus spread. The U.S. Labor Department reported Thursday that weekly initial jobless claims came in lower than expected.
The CME FedWatch Tool shows that 100% of traders now expect a rate increase at the March meeting, compared with 60.7% a month ago. Money markets are now pricing in multiple rate increases this year.
March silver futures decreased 1.5% Thursday to $22.38 an ounce on Comex. The front-month contract advanced 0.3% in the first four days of this week. Silver dropped 4.1% in January after gaining 2.4% in December. It fell 12% in 2021. Silver prices are tied to industrial demand. The March contract is up $0.205 (+0.92%) an ounce to $22.580 and the DG spot price is $22.63.
Spot palladium fell 2.2% Thursday $2,333.00 an ounce and is down 2.6% so far this week. Palladium jumped 24% last month after rallying 9.6% in December. It fell 22% in 2021. Palladium’s main use is in catalytic converters for gasoline-powered vehicles. Currently, the DG spot price is slightly down $6.20 an ounce to $2,328.50.
Spot platinum decreased 1.1% Thursday to $1,038.50 an ounce. It’s up 2.4% so far this week. The metal rose 5.7% in January after gaining 2.9% in December. It lost 9.4% last year. The DG spot price has currently slipped $9.20 an ounce to $1,029.10.
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