Gold News

$2000 Gold Price 'Needs Fed to Cut Rates' as Jobs Growth Slows, Treasury Trims Refunding

The GOLD PRICE rallied but held $10 below the $2000 mark Wednesday lunchtime in London as mixed US jobs data and lower-than-expected US government borrowing plans preceded today's November interest-rate decision from the Federal Reserve.
The United Nations meantime welcomed news of the first medical evacuations from Gaza, into Egypt, amid Israel's intensifying bombardment and invasion following terrorist regime Hamas' 7th October atrocities.
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With global stock markets rising to a 1-week high on the MSCI World Index, longer-term borrowing costs fell hard in the bond market, knocking 0.1 percentage points off the 10-year US Treasury yield, as Washington's quarterly refinancing plans said it will ask lenders for $10 billion less this month than analysts had been expecting, avoiding the fresh sell-off which its August announcement spurred.
But longer-term, and "Just when the US needs lenders, they've made more 'frenemies' [by supporting Israel's] war and it's clear that China/Russia etc have been selling US Treasuries (ie, buying gold) extensively recently," says Swiss bullion refining and finance group MKS Pamp's precious metals strategist Nicky Shiels.
Chart of US public debt outstanding (blue, right axis) vs. annual yield on 10-year US Treasury bonds. Source: St.Louis Fed
"Heightened geopolitical tension in the Middle East will continue to underpin the gold price in the short term," Reuters today quotes analyst James Moore at specialist news-site Fastmarkets.
"[But] we do not envisage a sustained challenge above $2000 per ounce until Western central banks, particularly the Federal Reserve adopt a more accommodative stance."
Futures traders betting on the Fed Funds market are now virtually unanimous that the US central bank will make no change to its target range of 5.25% to 5.50% per annum at today's meeting, according to derivatives exchange the CME's FedWatch tool.
Betting on a rise in December to a ceiling of 5.75% has meantime fallen back to 1-in-4 of all open positions after rallying from beneath 1-in-5 last week, the lowest in 3 months.
For January, that figure has dropped below 1-in-3, back in line with the last 3 months' average ratio of traders expecting Fed rates to be higher than today at the start of 2024.
New job openings across the world's largest economy rose faster than analysts expected on today's 'Jolts' data for September.
But Friday's non-farm US payrolls data for October from the Bureau of Labor Statistics is expected to show the weakest employment growth since June's 30-month low, expanding by 180,000 on analysts' consensus forecasts – almost 60% beneath the past 3 years' monthly average.
The private-sector ADP Payrolls' estimate today came in 25% below its consensus forecast at 113,000, and activity at US factories shrank in October for the 12th consecutive month, said the new ISM survey of purchasing managers in the manufacturing sector today.
The giant manufacturing sector in China – where gold prices for the precious metal's largest consumer market today edged back from a 4-session run of new all-time Yuan highs – contracted in October for the 3rd month running according to today's PMI survey from S&P Global, published by the data agency for news-group Caixin.
"Manufacturers trimmed their staffing levels for the second straight month," says the report, with the sector shedding jobs at the fastest pace since May as input costs rose overall at the fastest since January "with firms often citing higher prices for raw materials and oil."
Crude oil prices rose Wednesday ahead of the US Fed decision on Dollar interest rates, but the commodity held almost unchanged from its level immediately after Hamas' atrocities in southern Israel spurred fears of a wider conflict in the oil-rich Middle East 3 weeks ago.
The Eurozone's Q3 GDP growth and consumer-price inflation for October both came in below analyst forecasts yesterday, putting the 20-nation currency bloc on the brink of economic recession for the 2nd time in 12 months as the cost of living rises at its slowest pace in almost 2 years.
Euro gold prices today crept back above €1880 per ounce – barely 1.1% below last week's retouch of all-time record highs – while the UK gold price in British Pounds per ounce held £20 below last week's new peak of £1658.
Silver meantime rallied but held below $23 per ounce, continuing to hold the more industrially useful precious metal lower for 2023 to date.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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.

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