Gold rises as economic data spurs Fed speculation 

Gold rises as economic data spurs Fed speculation

Gold rises early Friday and heads for its best week in five as economic data spurs Fed speculation that they would cut interest rates in the next few months.

U.S. weekly initial jobless claims data released Thursday showed that the number of Americans filing new claims for unemployment benefits rose more than expected last week to the highest level since August. The Fed closely watches both labor market and inflation data when setting monetary policy. A weakening in the labor market is seen as an indicator that the Fed may have to cut rates sooner rather than later. Lower interest rates make gold a more attractive investment. 

University of Michigan consumer sentiment data comes Friday and may provide additional direction. 

Front-month gold futures gained 0.3% Thursday to settle at $2,340.30 an ounce on Comex, and the most-active June contract rose 1.4% in the first four days of the week. Bullion gained 2.9% in April after rising 8.9% in March – the biggest monthly gain in more than three years – and dropping 0.6% in February. The metal rose 13% in 2023. $2375.70 The July contract is currently up $35.40 (+1.51%) an ounce to and the DG spot price is $2369.30

Jobless claims rose by 231,000 last week, according to the Labor Department, above economists’ average estimate of 214,000. The report comes on the heels of last week’s release of the monthly jobs report for April, which showed that nonfarm payrolls increased just 175,000 last month, the smallest gain since October and below economists’ estimate of 240,000. 

About 91.5% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in June, while 8.5% expect a 25 basis point cut. More than 65% of investors also expect the Fed to hold rates at current levels in July. Most investors don’t expect a rate cut until September. The Fed has raised rates by 5.25 percentage points since March 2022 in an effort to rein in inflation. Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% at policymakers’ last meeting, with forecasts for a rate cut moving to later in the year. 

The Fed needs “more time” for high interest rates to continue to restrict the economy, San Francisco Fed President Mary Daily said Thursday. 

The Fed’s favorite inflation measure – the personal consumption expenditures price indexsurpassed economists’ estimates for both the headline and core numbers for March. The Fed’s goal is for 2% inflation. April U.S. consumer price index and producer price index data are due out next week.

The Bank of England on Thursday held interest rates steady and said that whether it will cut in June depends on upcoming economic data. The European Central Bank will publish an account Friday of its April policy meeting. 

Separately, gold remained elevated on haven demand as Israel continued with its operation in Rafah, Gaza, bolstering fears that the conflict will expand regionally.

July silver futures increased 2.8% Thursday to settle at $28.37 an ounce on Comex, and the front-month contract rallied 6.3% in the first four days of the week. Silver rose 7% in April after gaining 8.9% in March and losing 1.2% in February. It ticked up 0.2% in 2023. The July contract is currently up $0.325 (+1.15%) an ounce to $28.6900 and the DG spot price is $28.44.

Spot palladium advanced 1.5% Thursday to $979.00 an ounce, and it gained 2.5% in the first four days of the week. Palladium declined 5.9% last month after advancing 7.7% in March and falling 4.6% in February. Palladium plummeted 38% last year. Currently, the DG spot price is up $27.20 an ounce to $1005.50.

Spot platinum gained 0.8% Thursday to $988.90 an ounce and is up 2.8% so far this week. Platinum gained 3.1% in April after rising 3.3% in March and decreasing 4.9% in February. Platinum dropped 6.8% in 2023. The DG spot price is currently up $15.20 an ounce to $1002.00.

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