Gold steady Friday after volatile week. The yellow metal rose more than 1% in the previous session on interest rate-cut optimism and haven demand, but is still headed for a weekly drop.
The rangebound trading came after a volatile week in the broader markets, with the biggest drop in almost two years on Monday followed by a rebound. Gold initially declined but recovered later in the week, particularly as the dollar and Treasurys stabilized.
Investors tracked by the CME FedWatch Tool unanimously expect the Federal Reserve to begin interest rate cuts at the central bank’s next policy meeting in September, particularly following worse-than-expected U.S. July jobs data last week. What’s in question is the size of the cut. Any cut would be considered bullish for gold, which becomes a more attractive alternate investment when rates go down, but a larger rate cut would be more bullish than a smaller one.
In data out Thursday, U.S. weekly initial jobless claims data for last week were bettter than expected, which was seen as a positive for the labor market.
Front-month gold futures rose 1.3% Thursday to settle at $2,463.30 an ounce on Comex, and the most-active December contract fell 0.3% in the first four days of the week. Bullion increased 5.7% in July, its biggest monthly gain since March. Gold fell 0.3% in June and gained 1.9% in May. The metal rose 13% in 2023. The December contract is currently up $6.50 (+0.26%) an ounce to $2469.80 and the DG spot price is $2422.80.
Last week’s jobs report triggered concerns that the Fed may have waited too long to begin cuts and that the economy could be on the brink of a recession, sending investors on a flight to safety.
While gold is often a hedge against uncertainty, it initially took a backseat to assets like the dollar and Treasurys. But the yellow metal’s status as another haven asset kept prices elevated, particularly because of geopolitical unrest and increasing tensions in the Middle East.
About 54.5% of the investors tracked by the CME FedWatch Tool are betting that the Fed will cut rates by 50 basis points in September, with 45.5% anticipating a 25 basis point cut. That’s a switch from a week earlier, when 78% projected a 25 basis point cut with 22% anticipating a 50 basis point cut.
The Fed has kept interest rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to rein in inflation.
The Fed closely watches both inflation and labor market data when determining monetary policy. The next inflation reports – the producer price index and the consumer price index for July – are due next week.
Applications for new unemployment benefits fell 17,000 to 233,000 last week, according to Labor Department data Thursday. That was lower than the Dow Jones estimate for 240,000. It was the first jobs report after the July monthly report, which came in just short of expectations, last week. It was seen as an indicator that high interest rates might be starting to affect the labor market.
Separately, the U.S., Egypt and Qatar in a joint statement called on Israel and Hamas to resume negotiations over a Gaza ceasefire and hostage deal in a renewed diplomatic push to stop an escalation of regional tensions after the killing in Iran of Ismail Haniyeh, a senior Hamas leader.
September silver futures rose 2.5% Thursday to settle at $27.61 an ounce on Comex, though the front-month contract decreased 2.8% in the first four days of the week. Silver dropped 2.1% in July after falling 2.9% in June and surging 14% in May. It ticked up 0.2% in 2023. The September contract is currently down $0.056 (-0.20%) an ounce to $27.550 and the DG spot price is $27.33.
Spot palladium rallied 2.8% Thursday to $935.00 an ounce and gained 3.9% in the first four days of the week. Palladium decreased 4.3% in July after rallying 8.1% in June and declining 5.1% in May. Palladium plummeted 38% last year. Currently, the DG spot price is down $0.90 an ounce to $931.00.
Spot platinum increased 1.7% Thursday to $942.10 an ounce, though it fell 2.3% so far this week. Platinum lost 2.1% in July after falling 3.7% in June and advancing 10% in May. Platinum dropped 6.8% in 2023. The DG spot price is currently down $10 an ounce to $929.60.
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