Gold surges on jobs report

Gold surges on jobs report

Gold surges on unexpectedly positive jobs report and stalled dollar rally. The weakened currency offset some of the bearishness of the Federal Reserve’s latest interest rate hike and expectations.

Nonfarm payrolls grew by 261,000 in October while the unemployment rate moved slightly higher to 3.7%, per the Labor Department. The payroll numbers beat the Dow Jones estimate of 205,000 more jobs, but worse than the estimated 3.5% unemployment rate. DG spot gold rose over $10 an ounce on the news.

The Fed raised interest rates by 75 basis points on Wednesday, bringing its total increase for the year to 375 basis points. The federal funds rate is now at 3.75% to 4%, following increases of 75 basis points each in June, July, September, and now November. Contributing to the move were high inflation, the war in Ukraine, and the fact that unemployment has stayed low, the Fed said in a statement, which also indicated that policymakers anticipate additional increases.

Front-month gold futures fell 1.2% Thursday to settle at $1,630.90 an ounce on Comex, and the December contract decreased 0.9% in the first four days of the week. Bullion fell 1.9% in October, its seventh straight month of declines. The metal is down 11% this year. Currently, the December contract is up $37.20 (+2.28%) an ounce to $1668.10 and the DG spot price is $1667.10.

“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation and economic and financial developments,” the Fed statement said.

Investors are betting there’s a 57.5% chance Fed policymakers will raise interest rates by 75 basis points in December, with the remaining 42.5% of investors tracked by the CME FedWatch Tool projecting a 50-basis-point hike. More investors were anticipating a 75-basis-point increase than a week ago.  

Rate hikes are typically bearish for gold, but the inflation underlying the moves is historically bullish.

Wednesday’s release of the monthly ADP employment report for October came in above expectations, showing the addition of 239,000 jobs. Economists had forecast 185,000. 

U.S. weekly initial jobless claims showed applications for first-time unemployment benefits dropped by 1,000 to 217,000 last week. Economists had projected 220,000. 

The latest inflation data – the October consumer price index – is due out next week. 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 lost 0.8% Thursday to settle at $19.43 an ounce on Comex. The December contract rallied 1.5% in the first four days of the week. Silver advanced 0.4% in October, its second consecutive monthly increase. It’s down 17% this year. The December contract is currently up $1.055 (+5.43%) an ounce to $20.485 and the DG spot price is $20.47.

Spot palladium dropped 2.1% Thursday to $1,840.00 an ounce and tumbled 4.3% in the first four days of the week. Palladium declined 15% last month. It’s down 3.9% in 2022. Currently, the DG spot price is up $109.40 an ounce to $1043.00

Spot platinum decreased 2.4% Thursday to $927.90 an ounce and is down 2.4% so far this week. Platinum rose 7.3% in October. It’s down 4.6% this year. The DG spot price is currently up $27.00 an ounce to $955.70.

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