Gold steadies after loss

Gold steadies after loss

Gold steadies Monday, clawing back above the $2300 line after posting its biggest loss since November 2020 on Friday.

The yellow metal tumbled on a double whammy of a stronger-than-expected U.S. jobs report – which makes it likely that the Federal Reserve won’t be in any hurry to start interest rate cuts –and data showing China scaled back on gold purchases in May after 18 consecutive months of buying. 

Investors this week will be looking to the Fed’s monetary policy statement and Chairman Jerome Powell’s news conference on Wednesday to determine the timeline of future rate cuts. A further postponement of any rate cuts would be considered bearish for the yellow metal, which becomes less attractive than some other assets when rates are high. New U.S. inflation data are also due out Wednesday.

August gold futures fell 0.9% last week to settle at $2,325.00 an ounce on Comex after the most-active contract dropped 2.8% Friday. 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 $3.30 (-0.14%) an ounce to $2321.70 and the DG spot price is $2304.60.

The central bank of China, the world’s largest gold consumer, didn’t buy any gold last month, ending an 18-month buying spree that had supported the yellow metal’s rally. 

The U.S. economy added 272,000 jobs in May, according to data released Friday by the Bureau of Labor Statistics. The figure was much higher than the 180,000 that economists had expected, and well above April’s downwardly revised 165,000. Unemployment rose to 4% from 3.9%, and it was the first time that the rate wasn’t below 4% in more than two years. 

The Fed has said it looks at both inflation and labor market data when determining monetary policy. The U.S. consumer price index for May is scheduled to come out Wednesday. 

Almost 100% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged on Wednesday. More than 90% of investors also expect the Fed to hold rates at current levels in July. Most don’t see a rate cut until November. Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% at policymakers’ last meeting. 

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. 

July silver futures dropped 3.3% last week to settle at $29.44 an ounce on Comex, and the front-month contract lost 6.1% Friday. 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 up $+0.250 (+0.85%) an ounce to $29.690 and the DG spot price is $29.46.

Spot palladium rose 0.7% last week to $923.50 an ounce, though it slipped 2.1%% Friday. Palladium declined 5.1% in May after losing 5.9% in April and advancing 7.7% in March. Palladium plummeted 38% last year. Currently, the DG spot price is down $12.60 an ounce to $917.00.

Spot platinum decreased 6.6% last week to $973.70 an ounce and fell 3.9% Friday. 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 up $3.60 an ounce to $976.80.

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