Gold steady little changed above $2,000 an ounce early Wednesday ahead of today’s Fed decision, shrugging off this morning’s strong jobs report as investors await the day’s monetary policy announcement.
Private payrolls rose by 296,000 for April, well above the estimate of 133,000, payroll processing firm ADP reported Wednesday.
Fed policymakers are expected to announce another 25 basis point interest rate increase to curb inflation. But even more important than the rate announcement will be the statement from policymakers and subsequent comments by Chairman Jerome Powell for indications on what the central bank plans to do next. While inflation hasn’t dropped to the Fed’s target, some economists are reading signals that the Fed may begin to pause its series of rate hikes.
Higher interest rates are typically bearish for gold, because they make the yellow metal less attractive as an alternate investment, but a pause or an end to the rate hikes would be bullish.
The ADP employment report for April is due Wednesday, before the Fed announcement, and will provide a picture of the labor market last month. Fed policymakers have said they track both inflation and labor market statistics when determining monetary policy.
June gold futures rose 1.6% Tuesday to settle at $2,023.30 an ounce on Comex, and the front-month contract is up 1.2% so far this week. Bullion increased 0.6% in April after gaining 8.1% in March. The metal fell $2.40 in 2022.
About 89.3% of investors tracked by the CME FedWatch Tool are betting that the Fed will raise interest rates by 25 basis points Wednesday, while just 10.7% anticipate the central bank will leave rates unchanged. Most investors are expecting another 25 basis point rate hike again in June.
The Fed has raised rates by 25 basis points twice this year following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November. The federal funds rate is currently at 4.75% to 5.00%.
The European Central Bank is also expected to raise rates for a seventh straight time on May 4.
Key jobs reports from the Labor Department come out after the Fed decision, with U.S. weekly initial jobless claims for last week due Thursday and the highly anticipated U.S. monthly jobs report for April due Friday.
The Fed’s favorite inflation measure, the personal consumption expenditures price index, came in higher last week, rising 0.3% in March from February, exclusive of food and energy costs. It increased 4.6% from the year earlier.
July silver futures rose 1.5% Tuesday to settle at $25.62 an ounce on Comex. The front-month contract advanced 1.6% in the first two days of the week. Silver gained 4.4% in April after increasing 15% in March. It rose 3% in 2022.
Spot palladium decreased 1.3% Tuesday to $1,453.00 an ounce, and it’s down 4.7% so far this week. Palladium rose 2% last month after rising 3.7% in March. Palladium lost 5.7% in 2022.
Spot platinum gained 1.3% Tuesday to $1,072.60 an ounce and is down 1.2% this week. Platinum added 8.5% in May after increasing 3.7% in March. Platinum surged 10% in 2022.
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