Market Update | 31/07/2023

Gold shrugs off the Federal Reserve rate hike and strong data to end higher, remains rangebound

Indications only | Closing prices are bids | Prices & Charts  : Trading View | Market Research Refinitiv | See disclaimer below

Today’s Observations

Gold stabilized on Friday after the dramatic post-Federal Reserve rate hike sell-off, posting it slow for the day of $1946 in early Asian trading. It then worked its way steadily higher throughout a relatively low-key session to reach a high of$1963 amid modest trading volume. This happened as the United States Dollar(USD) and United States Treasury yields gave up some of the previous day’s gains. The yellow metal ended at $1959, representing a gain of 0.72% for the day but a marginal loss of 0.15% on the week.

Silver recouped some of Thursday’s 3.17% washout to end up 0.83% on the day at $24.34 but was down1.10% for the week. Platinum posted a marginal gain of 0.11% on Friday, closing at $939 but fell 2.90% over the week. Meanwhile, palladium rose 0.4% to $1240but also lost 3.97% on the week.

Market Commentary

July 28, 2023(Reuters) – Gold rose on Friday after a sharp fall one day earlier, helped by a slight retreat in the dollar. Signs of cooling U.S. inflation raised bets that the Federal Reserve will likely end its monetary tightening cycle. Spot gold was up 0.75% at $1,959.53 per ounce by 2:15 p.m. Eastern Time (1815 Greenwich Mean Time). U.S. gold futures settled 0.8% higher at $1,960.40.

U.S. annual inflationslowed considerably in June; data released on Friday showed. Inflation, asmeasured by the personal consumption expenditures (PCE) price index, increased0.2% last month, according to the Commerce Department. Rising interest ratesmake holding gold less appealing to investors since bullion yields no interest.“The core PCE, which is what the Fed really looks at, came in line withestimates. It really wasn’t much of a surprise. Also, the dollar is weakertoday and is giving a bit of a boost for gold,” said Edward Meir, a metalsanalyst who provides research for Marex. “I think the Federal Reserve does notreally mind seeing the stronger data as long as the inflation numbers continueto come down. The Federal Reserve is probably done raising rates and I would ingeneral be inclined to buy the dips on gold,” Meir added.

Gold slipped nearly1.4% on Thursday to register its worst day in nearly a month. Data showed thatthe U.S. economy grew faster than expected in the second quarter and weeklyjobless claims fell, boosting the dollar. However, on Friday the dollar slipped0.16% against its rivals, making gold less expensive for other currencyholders. Both the U.S. central bank and the European Central Bank raisedinterest rates this week and kept the door open to further tightening. Spotsilver also gained 0.83% to $24.33 per ounce, while platinum fell 0.23% to$933.81, and palladium was near flat at $1,241.41.

Economic Analysis

Personal income in the United States rose by 0.3 percent from the previous month in June 2023, easing from a 0.5 percent increase in May and falling short of market expectations of a 0.5 percent advance. Compensation of employees increased by 0.5 percent, driven by a 0.6 percent growth in wages and salaries, and a 0.4 percent rise in other costs.

Personal spending incurrent dollars in the United States rose by 0.5 percent in June of 2023. Thissurpassed market expectations of a 0.4 percent expansion and accelerated fromthe upwardly revised 0.2 percent increase in the previous month. The datareflected a $52.1 billion in spending on services, while goods spending totaled$49.1 billion. This underscores consumers’ resilience to higher interest rates and backs a batch of recent releases that strengthened the argument for the Federal Reserve to remain hawkish. Source: U.S. Bureau of Economic Analysis.

Core PCE prices in the US, which exclude food and energy, went up by 0.2% month-over-month in June 2023. This eased from a0.3% increase in the previous month and came in line with market expectations. The annual rate, which is the Federal Reserve’s preferred gauge to measure inflation, rose by 4.1%. This is the lowest since September 2021 and is less than market expectations of 4.2%. When including food and energy costs, the PCE price index rose 0.2% from the previous month and 3% from the corresponding period of the previous year, marking the lowest since March 2021. Source: U.S. Bureau of Economic Analysis.

Gold Chart ($/oz)

Silver Chart ($/oz)

Platinum Chart ($/oz)

Palladium Chart ($/oz)

This document is issued by Value Trading BV. While all reasonable care has been taken in preparing this document; no responsibility or liability is accepted for errors of fact or for any opinion expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only and for private circulation. It does not constitute any offer, recommendation or solicitation to any person to enter into transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration.