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Gold futures survive to close above $2,000; Inflation data, Fed on watch

Published 10/04/2023, 19:12
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By Barani Krishnan

Investing.com -- The March U.S. jobs report was neither a pedestal nor wrecker ball for the bulls in gold.

Futures of the yellow metal settled around the key $2,000-an-ounce level on Monday while the spot price traded not too far from there after the latest monthly report on U.S. non-farm payrolls, or NFP, showed an addition of 236,000 jobs, just shy of the 239,000 called by Wall Street’s forecasters. The March NFP number was well above the 200,000 that would have been instrumental in getting the Fed to pause in May. Annual wage gains also slowed but remained too high to be consistent with the central bank's 2% inflation target.

Further on inflation, the Consumer Price Price Index, or CPI, reading for March, due on Wednesday, is expected to be on the higher side, though somewhat benign. Economists have forecast core consumer price inflation, which excludes food and fuel costs, to rise 0.4% on a month-over-month basis, for an annual increase of 5.6%, up from 5.5% in February.

The NFP and forecast CPI, combined, are suggesting at the least that the Fed has another 25 basis point hike coming in May that would effectively raise rates to a peak of 5.25%. So far, Wall Street expectations for a Fed rate cut — not just pause — by the year end appear to have little currency.

The Fed itself has minutes of its March 22 rate decision — where it added another quarter point to rates — due for release on Wednesday. While that could shed some light on how the central bank might proceed going forth, the general consensus as of now is that it isn’t done yet with hikes.

For macro-related assets, including oil and gold, that could mean more headwinds.

Gold for June delivery on New York’s Comex settled at $2,003.80 an ounce, down $22.60, or 1%, after a session low at $1,996.70.

The spot price of gold, more closely followed than futures by some traders, was at $1,989.38 by 13:45 ET (17:45 GMT) after an intraday low at $1,981.74.

“Gold should continue to hover around the $2,000 level, but if dollar strength remains, key support might come from the $1,970 region,” said Ed Moya, analyst at online trading platform OANDA.

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