Gold News

Gold Price Sunk by Big US Jobs Beat But Hits Fresh China Record

GOLD PRICES sank on Friday after US jobs data came in way ahead of analyst forecasts, but physical bullion still made its 1st weekly gain in 5 as the threat grew of military conflict between Iran and the USA while worries continued over financial losses in US commercial real estate debt.
With 1 week to go until China's wholesale bullion market shuts for Lunar New Year – the biggest gold-buying festival in gold's biggest consumer nation – gold prices set a new benchmark record in Shanghai today, fixing at ¥483.65 per gram as the CSI300 stock-market index fell 1.2% to a fresh 5-year low.
But US stock markets extended their rebound from Wednesday's drop as the Federal Reserve's "bombshell" against hopes for a March interest-rate cut were offset by bumper earnings results from retail giant Amazon (Nasdaq: AMZN) and Facebook owner Meta (Nasdaq: META), now paying its first ever dividend to shareholders after nearly 14 years as a publicly listed stock.
Despite the latest US manufacturing PMI report from the ISM showing a rebound in cost inflation and "a real short-term increase in the cost of international freight" thanks to the Red Sea attacks by Iran-backed Houthi militants, "Lower interest rates are [still] widely expected this year," says Bruce Ikemizu – the London Bullion Market Association's 2023 gold price forecast winner and director of Tokyo's JBMA trade body – in the new LBMA analyst survey for 2024.
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"I would expect [that plus] geopolitical tensions and dedollarisation to push the gold price still higher in 2024," Ikemizu says, predicting an annual average of $2100 per ounce – some $40 above the average prediction from all entrants.
Chart of US unemployment rate (red) vs. Fed Funds interest rate (blue). Source: St.Louis Fed
Today's strong non-farm payrolls data sent the odds of the Federal Reserve cutting its key interest rate in March down to just 1-in-5 according to futures market trading, its weakest chance since mid-November after peaking above 90% at the end of 2023.
The market's consensus forecast for December's Fed decision also turned 'hawkish', predicting an end-year rate of 4.12% - sharply below today's 5.50% ceiling but almost half-a-point above the forecast 2 weeks ago and the highest since before the Fed itself said it expects to start cutting rates this year at its December 2023 meeting.
The gold price meantime lost $30 inside an hour, before the price of bullion in London – heart of gold trading and storage worldwide – rallied $5 to $2032 per Troy ounce at the City's 3pm benchmarking auction, 0.7% higher from last Friday's finish.
Non-farm payrolls expanded by 353,000 in January, the Bureau of Labor Statistics said today, the strongest US jobs growth since last New Year and almost twice the addition expected by analysts.
Revisions to last year's US jobs data knocked only 1,255 cumulative payrolls off the previous BLS total for 2023.
The unemployment rate held at 3.7%, a 5-decade low when reached in 2018 and exactly in line with the past 2 years' average.
Wage growth re-accelerated to 4.5% per year, sharply above the latest US inflation readings.
"We will not start any war, but if anyone wants to bully us they will receive a strong response," said Iran's President Ebrahim Raisi meantime after Tehran-backed militants Al-Nujaba in Iraq said they will continue to attack US bases even as Washington prepares to retaliate over the killing of 3 soldiers last weekend in neighboring Jordan. 
For commercial real estate lenders, "There's going to be a reckoning...even in a benign environment, even in a soft landing...and the worst of that turmoil is yet to come,"
says Drew McKnight, co-CEO of $46bn asset managers Fortress Investment.
Mortgage deals on $1.2 trillion of commercial US real estate are set to need refinancing by the end of next year, according to investment bank Goldman Sachs – "almost a quarter of all outstanding commercial mortgages," says Reuters, "and the highest recorded level going back to 2008," year of the global financial meltdown.
Silver fell harder than gold prices and failed to rally, losing 30 cents for the week at $22.61 per Troy ounce.
The UK gold price in Pounds per ounce meantime held at £1606, trading 1.3% higher for the week.
So did the Euro gold price, fixing at London's 3pm benchmark around €1882.

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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