Gold solidified its position above $1,400 an ounce in the early morning hours after a rocky time on Friday following the strong U.S. jobs report. Today’s climb got an assist from expectations that the U.S. Federal Reserve is still set on cutting interests rates and from lingering concerns over global growth.
August gold futures fell 1.5% on Comex on Friday and retreated 1% last week. Currently, the August contract is at $1,406.7, up $6.60.
As we reported in Friday’s Market Gage, nonfarm payrolls rose 224,000 in June, topping market expectations of 165,000, according to the Labor Department. The unemployment rate was a bit higher at 3.7% but still near 50-year lows.
The rosy jobs news did not impact hopes for a rate cut this month. The CME FedWatch Tool has kept the odds of a July 31 rate cut at 100% since the Federal Open Market Committee’s last meeting in June. However, it might not be as deep as previously anticipated. The likelihood of a 50-basis-point cut has fallen to just 3.9% this morning from 32.3% on June 28, the CME tool showed, and the chance of a 25-basis-point reduction has risen to 96.1% from 67.7%.
One thing to watch for this week. It’s expected Fed Chairman Jerome Powell will provide further cues on the near-term outlook for monetary policy at his semi-annual testimony to the U.S. Congress on the economy on Wednesday.
Rate doves are hoping that the U.S. persistent moderate wage gains and mounting evidence of a slowing economy could still encourage Fed to cut interest rates this month.
It’s thought a rate cut by the Fed could spark a similar action in China, according to Reuters. Analysts say China’s central bank could cut its benchmark policy rate for the first time in four years to support the slowing economy.
Meanwhile, the value of China’s gold reserves rose to $87.27 billion at the end of June from $79.83 billion at the end of May, the seventh consecutive monthly gain, data showed Monday. China is the world’s largest gold consumer.
On Friday, India increased customs duty on gold and other precious metals to 12.5% from 10% in a surprise move that could dampen retail demand and cause prices to drop. India is the world’s second-largest bullion consumer, and it was the first time the government had raised the tax in six years.
In other news, Barrick Gold Corp. is working with advisers to find a buyer for its Massawagold project in Senegal, which it acquired as part of its purchase of Randgold Resources Ltd., Bloomberg reported on Sunday, citing people familiar with the matter.
Silver futures regained a little ground early Monday. They tumbled 2.2% Friday on Comex, but this morning finds the August contract at $15.065, up $.105. Victor Dergunov, the founder of Albright Investment Group, wrote on Seeking Alpha that he sees “the buying opportunity of the decade” in silver. The metal has been underperforming gold, but it will typically begin to outperform the yellow metal in the mid to late stages of a bull run, he said.
Spot platinum is currently up .20% after dropping 2.9% last week. Palladium is off .53% this morning after gaining 2.2% last week.
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