Gold slips in Wednesday morning trading on profit-taking and a stronger dollar, but the yellow metal still remained near recent record highs supported by the escalation of conflicts in the Middle East. Gold shrugged off this morning’s U.S. employment data.
Gold and the Fed getting some mixed signals from today’s economic data. September’s private sector hiring grew per this morning’s report from payrolls processing firm ADP. The month added 143,000 jobs, accelerating from the upwardly revised 103,000 in August and beating the forecast of 128,000 from economists polled by Dow Jones. While hiring increased, the rate of pay growth dropped. The 12-month gain for those staying in their jobs dropped lower to 4.7%, while job switchers’ pay fell 6.6%, down 0.7 percentage point from August.
The most closely watched report will be the U.S. monthly jobs data for September, due out Friday.
Front-month gold futures rose 1.2% Tuesday to settle at $2,690.30 an ounce on Comex, and the most-active December contract advanced 0.8% in the first two days of this week. Bullion gained 5.2% last month after advancing 2.2% in August and increasing 5.7% in July, its biggest monthly gain since March. The metal rose 13% in 2023. The December contract is currently down $8.90 (-0.33%) an ounce to $2681.40 and the DG spot price was $2661.70.
Despite the strength in the U.S. currency and some recent bearish signals from the Fed, there was a floor under gold prices as the likelihood of all-out war between Israel and Iran increased. Israel vowed to retaliate after an Iranian missile attack Tuesday that followed Israeli strikes on Lebanon in the past two weeks and the almost year-old war between Israel and Hamas.
Fed Chairman Jerome Powell said Monday that the central bank’s anticipated interest rate cuts would occur at a measured pace. Previously, many investors had anticipated another sizeable rate cut in November. More now forecast that the Fed will reduce rates by a smaller amount.
The Fed lowered interest rates by 50 basis points last month to 4.75% to 5.00%. The central bank had kept them at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to rein in inflation.
All investors tracked by the CME FedWatch Tool agree that the Fed will likely cut rates again in November. About 65.8% expect a 25 basis point reduction, while the rest anticipate a 50 basis point one. The Fed has two scheduled policy meetings left this year, and most investors tracked by the tool expect rates to drop to 4.00% to 4.25% or lower by the end of 2024.
The Fed’s favorite inflation measure, the personal consumption expenditures price index, came in lower than expected on Friday. Looser monetary policy is typically bullish for precious metals, increasing their appeal as alternate investments.
Front-month silver futures increased 0.9% Tuesday to $31.74 an ounce on Comex, though the December contract fell 0.2% in the first two days of the week. Silver rallied 7.9% in September after gaining 0.7% in August and dropping 2.1% in July. It ticked up 0.2% in 2023. The December contract is currently up $0.718 (+2.26%) an ounce to $32.460 and the DG spot price is $32.25.
Spot palladium dropped 0.3% Tuesday to $1,007.00 an ounce and is down 1.9% so far this week. Palladium gained 3.2% in September after increasing 3.2% in August and decreasing 4.3% in July. Palladium plummeted 38% last year. The DG spot price is currently up $26.70 an ounce to $1035.00.
Spot platinum rallied 0.9% Tuesday to $993.10 an ounce, though it decreased 1.8% in the first two days of the week. Platinum increased 5.6% last month after sliding 5.2% in August and losing 2.1% in July. Platinum dropped 6.8% in 2023. The current DG spot price is up $21.90 an ounce to $1016.90.
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