02/02/2024: This Week in Gold with Market Updates:
Gold opened the week trading at $2,019 an ounce after closing the previous week 0.5% lower. The daily and hourly graphs show price gradually moving up throughout the week, with gold on course to finish this week higher at the time of writing.
On Monday, price rose 0.7% to $2,033 an ounce. Price was boosted by safe-haven demand amid rising tensions in the Middle East. With the U.S. getting more and more involved in the ongoing conflict, investors rushed to gold due to the benefits it possesses during times of geopolitical tensions. U.S. Treasury yields also fell, which lowers the opportunity cost of holding gold.
Tuesday saw another rise in gold, albeit a much smaller one than Monday’s. Price rose $4 an ounce to $2,037. This brought gold to a two-week high. Gold was pushed higher by a weakening dollar and lower Treasury yields. Investors were also anticipating the FED’s policy meeting on Wednesday, hence the consolidation experienced for much of the day.
Gold consolidated further on Wednesday, in anticipation of the FED’s meeting later that day. Prior to the meeting, gold surged 0.7% within the space of 4 hours before quickly reversing course and moving lower for the remainder of the day. Price ultimately finished only $2 higher from the open at $2,039 an ounce. Price was pushed lower by the FED’s decision to leave interest rates unchanged. Interest rates and gold have an inverse relationship.
Thursday saw gold make a dramatic move to the upside. Price rose 1.2% in the space of 5 hours from mid-morning to afternoon trading hours. Price briefly moved to $2,066 an ounce before coming back down slightly to the $2,055 level and holding at this level for the remainder of the day. The market reacted to multiple different pieces of information during Thursday, with investors increasing expectations of a rate cut at the next meeting. Safe-haven demand was also boosted by the sharp sell-off in U.S. Bank ‘New York Community Bancorp’ (TCKR: NYCB). Trouble at regional banks usually leads to a rise in demand for gold.
On Friday, markets consolidated from early to mid-morning before reacting to the latest jobs data in the U.S. The figure for new U.S. non-farm jobs came in better than expected at 353k. This beat the market consensus of 185k. The unemployment rate also came in better than expected, at 3.7% against the forecasted 3.8%. This information saw gold experience a large sell-off with price falling $24 in the space of 2 hours to $2,032 an ounce, a 1.2% fall.
At the time of writing, gold is trading at $2,034 an ounce. This is a 0.7% rise for the week.
Silver opened the week trading at $22.80 an ounce. Silver did not have much of a trend and moved sideways for much of the week. From Monday-Tuesday, silver moved 1.6% higher to $23.16.
Price then began to fall on Wednesday and continued to fall into the early hours of trading on Thursday, reacting to the same news as gold i.e. no interest rate cut by the FED.
Similarly to gold, price experienced a dramatic rise to the upside on Thursday afternoon after the plummet of NYCB shares and increased interest rate cut expectations for the FED’s next meeting. Silver moved 2.33% to the upside to $23.20 and held at this level for the remainder of the day.
During the early hours of trading on Friday, price consolidated before, like gold, experiencing a large sell-off. Price fell 2.9% within the space of 2 hours to $22.56 an ounce. This was in reaction to U.S. latest job reports data, released midday on Friday. At the time of writing, silver is trading at $20.95 an ounce. This is a 0.7% fall for the week.
Consumer confidence came in at 114.8 for the month of January. This was higher than the expected 114.2 and the previous month’s figure of 108. A reading higher than expected is usually bullish for USD which would limit gold’s moves to the upside. However, this data can be overpowered by other factors such as safe-haven demand.
Interest Rate Data:
The FED’s latest meeting on Wednesday culminated in the decision to keep interest rates unchanged at 5.50%. This was an expected move, with the majority of analysts forecasting rates to stay at the same level.
The latest CPI data was released by the ECB on Thursday with inflation seen to cool. Inflation came in at 2.8% year-on-year, higher than the forecasted 2.7% and lower than the previous month’s 2.9%.
Month-on-month, prices decreased. The economy experienced deflation for the month of January, with prices falling 0.4%, as expected. This was much better than the previous month’s figure, where prices rose 0.2%.
U.S. Non-Farm Payrolls:
This data seemingly had the most effect on both gold and silver during the week. Jobs data came in much better than expected, with 353k jobs being created in the month of January. Unemployment also came in better than expected at 3.7%. Month-on-month the figure remained the same. This news led to a large sell-off in both gold and silver markets due to the precious metals inverse relationship with jobs data.