Gold rebounds on bargain hunting, but stays below $1,900. The bullion bounced back early Monday from Friday’s selloff while remaining below the psychological threshold because of a strong dollar and concerns that the Federal Reserve may keep raising interest rates after last week’s strong U.S. jobs report.
Futures fell 3.6% last week in the first weekly drop in seven weeks as markets responded to a 25-basis-point interest rate increase from the Federal Reserve. The Fed raised rates by 50 basis points in December and by 75 basis points each in June, July, September, and November.
Front-month gold futures fell $69 last week to settle at $1,876.60 an ounce on Comex after April futures tumbled 2.8% Friday. It was the first close below $1,900 by a most-active contract since Jan. 12. Bullion increased 6.5% in January after gaining 3.8% in December and increasing 7.3% in November. It was the longest consecutive monthly rally since July 2020. The metal fell $2.40 in 2022. The April contract is currently up $6.8 (+0.36%) an ounce to $1883.40 and the DG spot price is $1873.10.
The U.S. monthly jobs report on Friday showed nonfarm payrolls increased by 517,000 in January, almost triple analysts’ expectations of 187,000, while the unemployment rate fell to 3.4%, the lowest level since May 1969.
The strong jobs report has contributed to speculation that the Fed may continue to raise interest rates into the fourth quarter of this year, later than some had previously anticipated, since the labor market has remained robust after the already-announced cuts. The release in late January of the December personal consumption expenditures price index, the Fed’s favorite inflation measure, showed that the inflation rate had cooled and that the Fed’s previous rate hikes were starting to make an impact.
Most investors tracked by the CME FedWatch Tool are betting that the Fed will boost rates by another 25 basis points in March. The tool shows 97.4% of investors anticipating a 25-basis-point hike, with the remaining 2.6% expecting the Fed to leave rates unchanged. A month ago, 59% of investors anticipated a 25-basis-point increase, with 32% expecting a 50-basis-point hike. The remaining 9% forecast no change.
Smaller rate hikes – and cuts – are seen as bullish for gold, while larger hikes are bearish. That’s because higher rates diminish gold’s attractiveness as a haven asset.
Investors this week will be watching for comments that could move markets from Fed Chairman Jerome Powell on Tuesday and U.S. President Joe Biden the same evening, during his State of the Union address.
Front-month silver futures dropped 5.2% last week to settle at $22.41 an ounce on Comex, with almost the entire decline in the March contract – 5.1% – on Friday. Silver fell 0.9% in January after rising 10% in December and increasing 14% in November. It advanced 3% in 2022. The March contract is currently down $0.125 (-0.56%) an ounce to $22.289 and the DG spot price is $22.38.
Spot palladium rose 0.6% last week to $1,640.00 an ounce, though it fell 1.6% Friday. Palladium dropped 7.5% in January after tumbling 4% in December. It lost 5.7% in 2022. Currently, the DG spot price is down $64.40 an ounce to $1581.50.
Spot platinum decreased 3.7% last week to $980.60 an ounce after losing 4.8% Friday. Platinum retreated 4.3% in January after increasing 3.4% in December and rising 11% in November. It surged 10% in 2022. The DG spot price is currently up $3.10 an ounce to $985.40.
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