Market Update | 31/08/2023

Gold Extends Its Rally After Soft United States Economic Data Amid Growing Noise About a Federal Reserve Pause

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

Today’s Observations

Gold flatlined in Asia and Europe, holding within a super tight trading range of $1935 to $1938. This was amid nominal volume as traders and investors took to the sidelines ahead of the private Automatic Data Processing (ADP) jobs data report and the latest revision of United States Gross Domestic Product (GDP) growth. When these data points came in softer than expected shortly after the New York opening, gold rallied to a fresh one-month high of $1949. This coincided with the United States dollar falling and United States 10-Year Treasury yields easing.

The yellow metal ended with a pared 0.26% gain at $1942 but has moved higher to $1947 this morning. For technical traders, the 100-day Moving Average (MA) is pegged at $1955 and is likely the target for today. Meanwhile, the 50-day MA, located at $1930, should now limit the downside. These chart points are setting the likely trading range for today.

Silver briefly traded above $25 for the first time in five weeks before easing back to end down 0.44% at $24.62. Platinum held in a tight trading range before ending with a marginal 0.2% loss at $982, and palladium fell 1.6% to $1230.

Market Commentary

August 31, 2023 (Reuters) – Gold hit its highest point in nearly a month on Wednesday. A fresh batch of weak United States economic readings reinforced the view that the Federal Reserve may have to hit pause on its interest rate hikes. Spot gold rose 0.4% to $1,943.92 per ounce by 2:20 p.m. Eastern Daylight Time (1820 Greenwich Mean Time), after hitting its highest point since August 2 earlier in the session. United States gold futures settled 0.4% higher at $1,973.00.

“Gold is trading at highs for the month as the weaker-than-expected ADP report and GDP revision continue a trend of softer economic indicators that will likely keep the Federal Reserve on hold in September,” said Tai Wong, a New York-based independent metals trader. Benchmark 10-year yields dropped to their lowest since August 11, while the dollar slipped to a two-week low after United States GDP data showed a softening of the economy in the second quarter. A drop in United States job openings added to the sentiment. Dollar-priced bullion, which bears no interest, finds support when yields fall. Bets on the Federal Reserve leaving rates unchanged in September rose to nearly 91%, from 88.5% before the data, according to the CME Group’s FedWatch tool. Investors now await the Personal Consumption Expenditures (PCE) price index on Thursday and the nonfarm payrolls report on Friday.

Economic Analysis

ADP Employment: Private businesses in the United States hired 177,000 workers in August 2023, the least in five months. This missed market expectations of a 195,000 rise and followed an upwardly revised 371,000 increase in July. “This month’s numbers are consistent with the pace of job creation before the pandemic,” said Nela Richardson, chief economist at Automatic Data Processing, Inc.

GDP Growth: The United States economy grew at an annualized rate of 2.1% in the second quarter of 2023. This is compared to the preliminary figure of 2.4% and the first quarter’s expansion of 2.0%. Downward revisions to both private inventory investment and non-residential investment were partially offset by an upward revision to state and local government spending. Growth rates eased for both consumer spending (1.7% versus 4.2% in Q1) and government consumption (3.3% versus 5.0%). Meanwhile, non-residential fixed investment saw the most significant increase in almost a year (6.1% versus 0.6%). Exports experienced the largest decline since the aftermath of the COVID-19 outbreak in the second quarter of 2020 period (-3.6% versus -4.0%). Additionally, private inventory investment had a negative contribution to the GDP. The source of this information is the United States 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.