Gold News

Blow-Out US Jobs Data See Gold Bullion Sink from Post-Fed High, Silver Down $2 Per Ounce

GOLD BULLION sank Friday lunchtime in London as new US jobs data blew past analyst forecasts, sending the Dollar soaring and also hitting Western stock markets after this week had seen further 2023 gains despite another interest-rate rise from the US Fed.
High-to-low, bullion in Dollar terms moved 4.2% across the last 48 hours, the 2nd sharpest price swing in gold on that time-frame of the last 12 months, beaten only by last March's surge to near-record highs following Russia's invasion of Ukraine.
"The key question for markets is whether [chairman Jerome] Powell's dovishness [in Wednesday's press conference] was intentional or accidental," said Bank of America Securities' chief economist Michael Gapen yesterday.
"Powell speaks again as soon as next Tuesday, so he will have a chance to strike a more hawkish tone if he feels the markets misinterpreted his message."
Today's non-farm payrolls estimate from the Bureau of Labor Statistics said the US added 517,000 jobs in January, the biggest NFP growth since July and almost 3 times the pessimistic forecast made by most economists.
Gold bullion priced in the Dollar sank $38 per ounce to $1878, the lowest in nearly 4 weeks and 4.2% below yesterday's new 9-month highs, reached after the Federal Reserve raised its key interest rate to the highest since October 2007.
Chart of gold bullion in US Dollars. Source: BullionVault
US equity prices reversed yesterday's 1.5% rise to 5-month highs and the EuroStoxx 600 index turned a small Friday gain into a 0.5% drop as the Dollar leapt to a 2-week high against the rest of the world's major currencies.
Betting on another 0.25-point rise from the Fed next month jumped from 4-in-5 to 19-in-20, data from the CME derivatives exchange says.
The odds of the Fed then trimming rates by Christmas 2023, back to today's 4.75% level or lower, meantime dropped from 88% to 71% according to the CME's FedWatch tool.
Longer-term borrowing costs leapt, pulling 10-year US Treasury yields 12 basis points higher from near 5-month lows of 3.37% per annum.
"Gold moved up towards $1960 during [Wednesday's Fed press] conference," notes Rhona O'Connell at brokerage StoneX, "while silver cleared $24 as investors anticipate[d] the end of the Fed's [rate-raising] cycle.
"Whether this will come sooner or later is still a moot point and we may yet see a burst of 'buy the rumour, sell the fact'. But we continue to believe that the tailwinds outweigh the headwinds for these metals."
Silver prices tracked and amplified the drop in gold bullion, plunging by $2 per ounce from yesterday's near-10-month high of $24.62.
Platinum briefly dipped below $1000, a new 2023 when reached ahead of this week's Fed decision, while sister-metal palladium – also primarily used in autocatalysts to reduce harmful emissions from fossil-fuel engines – also fell but held $30 per ounce above Tuesday's 3.5-year low of $1596.
"If inflation proves to be stickier than expected, it might be a double-edged sword for gold," says analysis from Erik Norland, senior economist at the CME Group derivatives exchange.
"On one side, gold might benefit from a USD that is losing its value...more quickly than expected.  On the other, higher than expected inflation could prevent the Fed from cutting rates in the manner that the interest rate markets and gold [had] incorporated into their pricing."
Thursday's smaller retreat in gold prices from its post-Fed peak saw the SPDR Gold Trust (NYSEArca: GLD) expand to need another 1.7 tonnes of bullion at 920.2 tonnes, the biggest since 31st October and heading for a third consecutive weekly inflow of investor money into the world's largest gold-backed ETF.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver, platinum and palladium market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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