Gold and Silver Leap on 'Dovish' US Jobs Data Ahead of the Fed
Wednesday, 1/31/2024 16:08
GOLD PRICES leapt into Wednesday afternoon's London bullion market benchmarking auction, fixing at the highest price since 12 January and trading at its higher ever on a US Federal Reserve decision day after new US data said the world's largest economy added far fewer new jobs than analysts predicted this month.
Silver prices jumped with gold – also hitting near 3-week highs in the spot market before edging back 10 cents per Troy ounce to $23.32 – as the private-sector ADP Payrolls estimate for January came in almost 30% below consensus forecasts.
Western stock markets fell, in contrast, with New York's tech-heavy Nasdaq losing 2.2% from Monday's fresh all-time high as solid quarterly earnings from Alphabet (Nasdaq: GOOG) and Microsoft (Nasdaq: MSFT)
failed to stem a retreat in the 'Magnificent Seven' tech giants, who averaged stock gains of over 111% in 2023.
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Bond prices also jumped, pushing the yield offered by 10-year US Treasury debt back below 4.0% per annum, while betting that the Fed will start cutting rates at its next meeting, in March, jumped from barely 2-in-5 bets to more than 3-in-5 after the ADP jobs data according to the CME derivatives exchange's
FedWatch tool.
Gold bullion peaked 5 cents below $2055 per Troy ounce after fixing at 3pm in London above $2050 – its 2nd highest monthly finish ever in the precious metal's key storage and trading hub, behind only last month's
record-high gold price weekly, monthly, quarterly and annual close.
Betting on December's Fed rate decision now says the US central bank will cut by 1.5 percentage points across 2024, sharply more dovish than
the Fed's own 2024 rates projection last month of cuts totalling 0.6 points.
"Overall," said a note earlier Wednesday from Swiss bullion refiners and finance group MKS Pamp's Nicky Shiels, "gold needs both a dovish Fed and supportive (dovish) data this week to reignite sustained investor participation and interest and to revisit the next leg higher into $2100."
"In our view," says the new 2024 outlook from Rhona O'Connell at brokerage StoneX, "the tailwinds trump the headwinds" with central banks continuing "to send a gold-friendly message to global investors."
Led by China, 2023 saw official-sector reserve managers as a group buy 1,037 tonnes of gold net of their selling, new estimates from the mining industry's
World Gold Council said today, down 4.1% from
2022's six-decade record central-bank gold buying but "maintain[ing] a breakneck pace."
"Banking stresses in all major economies are [also] still with us," O'Connell at StoneX adds, forecasting a rise of 9.5% in gold's annual average price from last year's new record high of $1940 per Troy ounce.
Creditors of failed Chinese property giant Evergrande are
"set to recover just a fraction" of what they're owed, according to analysts, risking a "domino effect" across the world's 2nd largest economy.
China's giant manufacturing sector shrank only a little this month, the official NBS survey said today – a report headlined as
"PMI up in January" by state news agency Xinhua – while services activity edged higher.
But that only saw traders further "unwind rescue bets" that Beijing will launch new economic stimulus, according to Bloomberg, with China's CSI 300 index of corporate stocks falling another 0.9% to hit a fresh 5-year low ahead of next week's start to the Lunar New Year holidays.
"Gold exposure
has become a necessity for Chinese portfolios as they continue to expect disinflation and income uncertainty," today's
Financial Times quotes analyst Colin Hamilton at Canadian bank BMO, reporting how
strong Chinese gold buying has been an "under-appreciated" driving gold prices in the view of Swiss bullion bank UBS.
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