Gold pressured in early morning trading by news that the Chinese central bank is halting buying gold and slipped again on the latest jobs data showing remarkably higher growth than expected. Before these unexpected reports, the bullion’s rally had flirted with $2400 an ounce.
Gold prices fell more than 1% on Friday after data showed The People’s Bank of China (PBOC) paused gold purchases in May after 18 consecutive months of buying. DG spot gold fell over $35 an ounce on the news to $2336.
The pressure continued on the release of the Labor Department’s report for May showing that the U.S. economy added far more jobs than expected, likely reducing the chance that the Fed would lower interest rates. Nonfarm payrolls jumped by 272,000 for the month, up from 165,000 in April and well ahead of the Dow Jones forecast of 190,000. The DG spot price dropped about $16 dollars an ounce to $2320.
The European Central Bank cut interest rates on Thursday for the first time since 2019, reducing three key rates by 25 basis points. Lower interest rates are typically bullish for gold, making them a more attractive alternate investment than other assets.
The Fed has a policy meeting scheduled for next week but is widely expected to keep rates unchanged. Still, the U.S. jobs report is being closely watched because a tighter labor market may provide the impetus for the Fed to start its long-awaited planned interest rate cuts sooner rather than later. The Fed has said it looks at both inflation and labor market data when determining monetary policy.
August gold futures rose 0.7% Thursday to settle at $2,390.90 an ounce on Comex, and the most-active contract advanced 1.9% in the first four days of the week. Bullion gained 1.9% last month after rallying 2.9% in April and rising 8.9% in March – the biggest monthly gain in more than three years. May’s was the fourth consecutive monthly rally. The metal rose 13% in 2023. The August contract is currently down $56.70 (-2.37%) an ounce to $2334.20 and the DG spot price is $2323.80.
Weekly initial jobless claims rose to a four-week high last week, data from the Labor Department showed Thursday. Applications for new unemployment benefits rose to a four-week high of 229,000 last week. The figure was above economists’ estimates for 220,000.
Separately, U.S. private payrolls growth missed estimates in May, according to the ADP Employment Report on Wednesday. Private payrolls grew just 152,000 in May compared with a downwardly revised 188,000 in April and below economists’ estimate for 175,000.
Last week, the personal consumption expenditures price index, the Fed’s favorite inflation measure, showed that “core” PCE, excluding volatile food and energy costs, increased 2% in April from a month earlier and 2.8% from a year earlier. Including food and energy costs, the report released Friday showed that “headline” PCE rose 0.3% and 2.7%, respectively. The Fed has a 2% target for inflation.
The Fed has raised interest rates by 5.25 percentage points since March 2022 to rein in inflation but has held rates steady for almost a year. The central bank was widely expected to begin a series of rate cuts in the first part of this year, but the timeline has been pushed back by persistently high inflation.
Almost 100% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged next week. Almost 80% of investors also expect the Fed to hold rates at current levels in July. Most see a rate cut in September. Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% at policymakers’ last meeting.
The ECB reduced its key rate to 3.75% from a record 4%, where it had been since September 2023. The move was expected by investors and had been priced in.
July silver futures gained 4.3% Thursday to settle at $31.37 an ounce on Comex, and the front-month contract advanced 3.1% in the first four days of the week. Silver surged 14% last month after rising 7% in April and gaining 8.9% in March. It ticked up 0.2% in 2023. The July contract is currently down $1.397 (-4.45%) an ounce to $29.970 and the DG spot price is $30.00
Spot palladium added $1.00 Thursday to $943.00 an ounce and is up 2.8% so far this week. Palladium declined 5.1% in May after losing 5.9% in April and advancing 7.7% in March. Palladium plummeted 38% last year. The DG spot price is currently down $16.60 an ounce to $926.50.
Spot platinum increased 1.3% Thursday to $1,013.40 an ounce but is down 2.7% so far this week. Platinum advanced 10% in May after gaining 3.1% in April and rising 3.3% in March. Platinum dropped 6.8% in 2023. The DG spot price is currently down $25.10 an ounce to $986.50.
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