Gold News

Sunk by US Jobs Data, Gold Price Rebounds Near Weekend Record on Fresh Fed Rate-Cut Hopes

GOLD PRICES spiked down to 2-week lows Friday lunchtime in London as new US data said the world's largest economy adding more jobs than expected in December, hitting bets that the Federal Reserve will start cutting Dollar interest rates early in 2024.
But the gold price then rebounded back to $2040 before shooting higher towards $2060 per Troy ounce – erasing almost of all its earlier 1.6% drop from last Friday's new record-high weekly, monthly, quarterly and annual gold price finish – after US services-sector activity for December came in much weaker than analysts had forecast.
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"Given the yellow metal's sharp gains in [late] 2023, profit taking is hardly surprising," says specialist consultancy Metals Focus.
"[But] looking ahead, we expect downward pressure to persist in the first half of 2024 [because] the first rate cut by the Fed will come later than currently priced in by financial markets."
Chart of Dollar gold price vs. Fed rate change expectations. Source: Metals Focus
Friday's US jobs data saw betting that the Fed will cut Dollar interest rate at this month's policy meeting fall to just 1-in-20 positions according to derivatives exchange the CME, the smallest since Tuesday 12 December, eve of the US central bank's pivot from vowing "higher for longer" to forecasting 3 interest-rate cuts for 2024.
The Fed will then delay cutting interest rates beyond March, according to 2/5ths of betting on that month's decision – sharply higher from the 1-in-10 proportion seen this time last week – after today's US jobs report beat consensus forecasts by more than a quarter for December's net addition to non-farm payrolls.
But while that first estimate from the Bureau of Labor Statistics kept the unemployment rate at 3.7% – close to last year's 7-decade lows – both November and October's NFP figures were revised sharply lower, offsetting almost 1/3rd of last month's addition.
The ISM's monthly services-sector PMI survey then came in at 50.6, the closest to "no growth" in 7 months and 2 whole points below consensus forecasts thanks to slower growth in new orders and a contraction in employment, with business managers reporting "concerns related to economic uncertainty, geopolitical events and labor constraints."
Longer-term interest rates fell back in the bond market as government debt prices rallied with gold, pulling the annual yield offered by 10-year US Treasuries back below 4.00% after reaching that level for the first time since December's more dovish 'dot plot' forecasts from the Federal Reserve.
Global equities also steadied, leaving New York's tech-heavy Nasdaq 100 – which last year rose 55.1%, led by what Bank of America analyst Michael Hartnett called the 'magnificent seven' of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla – down some 3.4% for 2024 to date.
"Barring the risk of new geopolitical drama," says Metals Focus, "an adjustment to rate likely to stimulate additional sell-offs in the gold market. [But] the scale
of this price pull-back will be restrained [and] we forecast firm support if prices dip below $1900 [before] "the Fed enters an interest rate cutting cycle in mid-2024. [That] should provide a fresh boost to confidence in gold [with] a notable price recovery around $2100 later this year."
The theocratic regime in Iran today vowed retaliation against ISIS terrorists, who claimed responsibility for two bombs killing at least 89 people at Wednesday's memorial service for a senior Tehran general assassinated 4 years ago by the USA.
Iran-backed Hezbollah meantime warned Israel there will be "no ceiling and no rules" if war breaks out following the killing in southern Lebanon of senior officials from Hamas, the group behind the 7th October atrocities across southern Israel.
Israel today denied press reports that it wants to "relocate" Palestinians from Gaza to Congo in a "voluntary emigration" out of the war-torn strip, where "85% of people are already internally displaced" by Israel's invasion and bombardment in search of Hamas according to the UN High Commissioner for Human Rights.
Gold in Euro and UK Pounds whipped less sharply on Friday's US data, ending the week in London around €1874 and £1614 per Troy ounce respectively.
Silver prices meantime rose back above $23 per ounce after fixing just beneath that level at midday in London with its lowest Friday benchmark since mid-November.

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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