Gold rises on jobs report ahead of Fed rate announcement as the dollar weakened early Wednesday.
Private payrolls made strong gains in October, particularly in the leisure and hospitality industry, according to this morning’s ADP report. Companies added 239,000 positions, well beyond the forecast of 195,000 and beating the downwardly revised 192,000 in September. Wages increased 7.7% on an annual basis, down 0.1 percentage point from the previous month.
Investors are betting there’s an 85.5% chance Fed policymakers will raise interest rates by 75 basis points this afternoon to curb 40-year highs in inflation. The remaining 14.5% of investors tracked by the CME FedWatch Tool are projecting a 50-basis-point hike. Just a week ago, 92.5% of investors anticipated a 75-basis-point increase, with 7.5% predicting a 50-basis-point hike.
Global markets will also be closely parsing the statement issued by the Federal Open Market Committee after its meeting and listening to Fed Chairman Jerome Powell’s news conference for signals about the pace and duration of additional interest rate increases planned for December and into 2023. The Fed has raised rates by 300 basis points so far this year to 3% to 3.25%, following increases of 75 basis points each in June, July, and September.
Rate hikes are typically bearish for gold, but the inflation underlying the moves is historically bullish.
Front-month gold futures gained 0.6% Tuesday to settle at $1,649.70 an ounce on Comex, and the December contract increased 0.3% in the first two days of the week. Bullion fell 1.9% in October, its seventh straight month of declines. The metal is down 9.8% this year. The current December contract is up $8.1 (+0.49%) an ounce to $1657.80 and the DG spot price is $1655.40.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 1.45 metric tons Tuesday to 919.12 metric tons, Reuters reported.
In addition to the Fed meeting, investors will be tracking U.S. jobs reports, including U.S. weekly initial jobless claims coming out Thursday, followed by the key U.S. employment report from the Labor Department on Friday.
The jobs reports are closely followed as economic indicators, and particular attention is being paid to whether the series of Fed rate hikes has dented the labor market and curbed economic growth.
U.S. manufacturing approached stagnation in October, Tuesday’s report from the Institute for Supply Management showed. Its gauge of factory activity slipped 0.7 pf a point to 50.2 points, the lowest level since May 2020. A reading above 50 indicates expansion, while one below it indicates contraction. October’s was the fourth contraction in five months.
The Fed’s favorite inflation measure, the personal consumption expenditures price index, increased in September, according to data released last week. Core PCI rose 0.5% last month from August and 5.1% over the previous 12 months. Including food and energy prices, PCE inflation rose 0.3% for the month and 6.2% on a yearly basis, the same amount it increased in August.
Front-month silver futures gained 2.9% Tuesday to settle at $19.67 an ounce on Comex. The December contract rallied 2.7% in the first two days of the week. Silver advanced 0.4% in October, its second consecutive monthly increase. It’s down 16% this year. The December contract is currently up $0.088 (+0.45%) an ounce to $19.755 and the DG spot price is $19.82.
Spot palladium rose 1.8% Tuesday to $1,908.50 an ounce, though it dropped 0.8% in the first two days of the week. Palladium tumbled 15% last month. It’s down 0.3% in 2022. The current DG spot price is down $5.50 an ounce to $1901.50.
Spot platinum gained 2% Tuesday to $955.00 an ounce and is up 0.5% so far this week. Platinum rose 7.3% in October. It’s down 1.9% this year. Currently, the DG spot price is up $13.20 an ounce to $964.70.
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