Market Update | 01/09/2023

Gold ends lower on the day and down 1.27% in August, key focus is on US employment data

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Today’s Observations

Gold had a choppy session on Thursday amid modest volume but held within a tight range. It was bounded by a high of $1947, posted in early New York trading as a number of United States economic reports came in as expected. The low for the day was set at $1940, recorded on the close, resulting in a marginal loss of 0.1% for the day. Over the month, the price of gold ended with a pared loss of 1.27% after trading between $1966 and $1885.

The yellow metal has ranged between $1939 and $1944 so far this morning. We expect an actively volatile end to the week with the release of the latest U.S. employment data. This data is closely watched by the Federal Reserve in setting their monetary policy and is the key risk event today. We expect gold to trade between the 50-day moving average set at $1930 and the 100-day moving average at $1955.

Silver fell 0.73% to $24.44 and was down 1.25% for the month after posting a 12% trading range of $22.26 to $25.02. It looks set for an active final four months of the year with the focus on the upside. Platinum declined 0.81% to $974 but gained 1.88% over the month and seems poised to reclaim a foothold back above $1000. Palladium eased 0.16% to $1228 and lost 4.06% for the month.

Market Commentary

September 01, 2023 (Reuters) – Gold rose on Friday and was poised for a second straight weekly gain, helped by diminished chances of United States interest rate hikes this year. This comes after a data-filled week that concludes with the pivotal jobs report later in the day. Spot gold gained 0.2% to $1,942.56 per ounce by 0130 Greenwich Mean Time, looking set for a more than 1% weekly gain after prices touched one-month highs on Wednesday. United States gold futures climbed 0.2% to $1,969.40.

U.S. Treasury yields and the dollar were set to end the week lower, making gold attractive for other currency holders. United States consumer spending increased by the most in six months in July. However, slowing monthly inflation rates cemented expectations that the Federal Reserve would keep interest rates unchanged next month. Atlanta Fed President Raphael Bostic laid out a case on Thursday against any further United States interest rate hikes, stating that monetary policy is already tight enough to bring inflation back down to 2% over a “reasonable” period.

Euro zone inflation held steady in August, but underlying price growth fell as expected, presenting a mixed picture that complicates life for the European Central Bank. Japan’s factory activity shrank for a third straight month in August, a survey showed on Friday. Impala Platinum Chief Executive mentioned a rapid decline in palladium and rhodium prices that has squeezed profits, lowered dividend payouts, and shifted the focus to cutting costs, catching platinum miners off guard. Other precious metals were on track for weekly gains as well. Spot silver added 0.4% to $24.53 per ounce, platinum rose 0.3% to $970.23, and palladium jumped 1.6% to $1,233.63.

Economic Analysis

Personal income in the United States increased by 0.2% over a month in July 2023, following a 0.3% increase in June, and was slightly below market forecasts of a 0.3% rise. Compensation of employees increased by 0.4%, driven by a 0.4% growth in wages and salaries, and a 0.3% rise in other costs. Meanwhile, personal income receipts from assets remained unchanged, as a 0.3% increase in personal interest income was offset by a 0.2% drop in personal dividend income.

Personal spending in current dollars in the United States jumped by 0.8% in July of 2023, marking the most significant increase since January. This was ahead of market expectations of a 0.7% increase, reflecting the U.S. consumer’s resilience to a slowing economy. Spending was also significantly higher in chained dollars (0.6%), underscoring the consumer’s resilience to inflation and suggesting that the Federal Reserve has leeway for further tightening.

The Personal Consumption Expenditures (PCE) price index in the United States increased by 0.2% month-over-month in July 2023, mirroring the pace seen in June and aligning with market expectations. Services prices advanced by 0.4%, accelerating from the 0.3% increase observed in the previous month. Meanwhile, goods prices declined by 0.3%, marking the third consecutive month of decrease. Among goods, the cost of durable goods dropped by 0.7%, while prices of nondurable goods remained unchanged. On a year-on-year basis, PCE prices rose by 3.3% in July, up from the 3.0% recorded in June. Excluding food and energy, the PCE price index also grew by 0.2% month-over-month and by 4.2% from the previous year.

Source: U.S. Bureau of Economic Analysis

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