Gold News

Gold Price Sinks on US Jobs Data But Sets Record Run Above $2000

The GOLD PRICE spiked lower on Friday, trading over $25 per ounce below last Friday's record-high weekly finish in London, after new data said the US labor market continues to run hot, crushing bets that the Federal Reserve will start to cut Dollar interest rates early in 2024.
Gold priced in the Dollar dropped $13 per Troy ounce inside 7 minutes – down over 0.6% – after the Bureau of Labor Statistics said non-farm US payrolls expanded by 199,000 in November, more than 1/10th greater than the typical analyst forecast.
Gold then fell further, down another $10 to within $3 of the $2000 mark – and $140 per Troy ounce beneath Monday morning's new all-time intraday gold price record – as the Dollar jumped near 3-week highs on its trade-weighted index against the rest of the world's major currencies.
But that still saw London's benchmark gold price come above $2000 at both the AM and PM auctions for a record 10th session running, beating the run of 9 sessions set when this spring's mini-crisis in US banking was followed by the US government flirting with a debt default as Washington hit its borrowing limit.
The price of US Treasury bonds today fell hard alongside the gold price, driving the yield offered by 2-year debt up by 0.1 percentage points to 4.725% per annum, the highest since last Friday morning, just before Fed chairman Jerome Powell gave a speech widely taken to signal the end of the US central bank's hiking cycle.
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With the Fed set to deliver its final policy decision and 'dot plot' forecasts of the year next Wednesday – followed on Thursday by the UK Bank of England and the 20-nation European Central Bank – expectations that the US central bank will make its first cut as soon as March 2024 also fell to 1-week low, dropping below 50% of trader positions according to the CME derivatives exchange's FedWatch tool.
That put the market's consensus view for Fed rates in 3 months' time at 5.25% against today's current Fed Funds rate of 5.33%.
Chart of the Dollar gold price (right) vs. March 2024 Fed Funds forecast. Source: BullionVault
"Higher for longer rates, due to sticky inflation, would be a tactically bearish factor for gold in 2024," said Swiss bullion refining and finance group MKS Pamp's metals strategist Nicky Shiels in a presentation at the London Bullion Market Association's annual winter seminar this week.
The bull case, in contrast, is that "The Fed is done, there's ongoing dedollarization [by China and other emerging-market central banks, plus] a US election cycle with Trump 2.0 risk, ongoing wars that aren't being resolved, a soft-landing / milder pullback of growth, and general underlying unhappiness.
"Against that backdrop, the potential buyers are nearly infinite."
Running contrary to this week's drop in US job openings and rising jobs cuts, today's strong US non-farm payrolls growth for November was down by almost 1/5th from the prior 12-month average, but it still came above the 12-month average before the start of the Covid pandemic shutdowns back in March 2020.
Today's NFP jobs estimate also put the US unemployment rate at 3.7%, down by 0.2 percentage from October's 21-month high with the steepest retreat in the jobless count since December last year.
Gold outside the Dollar fell less steeply on Friday but still flirted with £1600 per Troy ounce for UK investors – down almost 5% from Monday's new spot-market record – and slipped through €1870 for French, German and other Eurozone traders, down by €100 from that fresh peak.
Silver extended the gold price move, trading over 10% below Monday morning's spike to 7-month lows and dropping below $23.30 per Troy ounce for the first time in almost 3 weeks.
Industrial commodities and Western stock markets were unaffected by the jump in bond yields and the Dollar, with crude oil trimming its drop for the week to 5% and the MSCI World Index holding close to last Friday's 4-month high.

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.

See the full archive of Adrian Ash articles on GoldNews.

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