Marketupdate | 22/09/2023

Gold falls as the USD and US10YT yields rally on hawkish Fed but ends with a pared loss

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Today’s Observations

Gold posted its’ high for the day of $1931 in early Asian trading on Thursday, but then suffered a sustained decline that extended to $1915, amid a rising USD and surging US10YT yields, shortly after the New York opening, following much stronger than expected weekly jobless claims that fell to the lowest level since January, backing up Jerome Powell’s hawkish rhetoric on Wednesday. However, just when gold looked vulnerable on the downside good buying emerged (the official sector?) to steady the market and result in a pared loss of 0.57% at
$1920. The yellow metal has extended the recovery to $1925 this morning and now looks set to end the week with day of sideways trading within technical parameters set by the 200-day MA at $1925 and the 100-day MA at $1945. Silver was the pick of the sector, gaining 0.69% to $23.40 as an increase in open interest on the COMEX pointed to inflows of ‘fast money’. Platinum fell 1.07% to $922, and palladium ended a volatile session unchanged at $1265.

Market Commentary

(Reuters): September 22, 2023

• Gold edged higher on Friday, although prices lingered near a one-week low touched in the previous session as the U.S. dollar and Treasury yields reaped the returns of the Federal Reserve’s hawkish stance on interest rates. Spot gold was up 0.2% at $1,923.22 per ounce by 0121 GMT, having logged its biggest daily drop since Sept. 5 on Thursday. U.S. gold futures added 0.2% to $1,943.00.

• The dollar stood near a six-month peak on the prospect of higher-for-longer U.S. rates, while benchmark 10-year Treasury yields rose to 16- year highs and Wall Street tanked in a broad sell-off.

• Central banks for the world’s biggest economies have served notice that they will keep interest rates as high as needed to tame inflation, even as two years of unprecedented global policy tightening reach a peak. Higher interest rates discourage the buying of non-interest-paying bullion, which is priced in dollars.

• The Fed’s plans for a prolonged period of elevated interest rates could continue pressuring stocks and bonds in coming months, though some investors doubt the central bank will stick to its guns.

• U.S. jobless claims dropped to an eight-month low last week, pointing to persistent labor market tightness even as job growth is cooling.

• U.S. House Speaker Kevin McCarthy’s attempt to restart his stalled spending agenda failed on Thursday, raising the risk of a government shutdown in just 10 days.

• SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.07% to 878.83 tonnes on Thursday.

• Spot silver rose 0.3% to $23.44 per ounce, platinum gained 0.3% to $921.98, and palladium steadied at $1,263.04.

Economic Analysis

• Jobless claims – The number of Americans filing for unemployment benefits plummeted by 20,000 to 201,000 on the week ending September 16th, the lowest since late January and well below market expectations of 225,000. Meanwhile, continuing claims fell by 21,000 to a near eight- month low of 1,662,000 in the earlier week, indicating the unemployed are having an easier time finding new work. The data added to evidence that the labor market remains at historically tight levels, pointing to added resilience to the Federal Reserve’s aggressive tightening cycle and adding leeway for a potential hike in November. he four-week moving average for initial claims, which removes week-to-week volatility, fell by 7,750 to 217,000. source: U.S. Department of Labor

• Existing-home sales in the United States edged 0.7% lower from a month earlier to a seasonally adjusted annualized rate of 4.04 million units in August 2023, the lowest level since January and below market expectations of 4.1 million. Sales fell for a third consecutive month, weighed by high mortgage rates and house prices. source: National Association of Realtors

Gold Chart ($/oz)

Silver Chart ($/oz)

Platinum Chart ($/oz)

Palladium Chart ($/oz)

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