Gold prices maintained their position above the pivotal mid-$1,900 level on Thursday, although a modest dip ensued following an uptick in inflation figures that raised apprehensions about potential Federal Reserve rate hikes. Simultaneously, projections indicating a potential significant decline in U.S. job numbers for August further contributed to an atmosphere of uncertainty.
Economists are currently forecasting a marginal increase of just 170,000 in non-farm payrolls for the previous month, compared to July’s addition of 187,000 jobs. This projection marks the most meager monthly job expansion since February 2021. The Federal Reserve is meticulously monitoring all data related to U.S. employment and wages, striving to ascertain their implications on inflation and the subsequent influence on the impending decision regarding interest rates on September 20.
A separate evaluation of inflation, represented by the Personal Consumption Expenditures (PCE) Index, released on Thursday, indicated a 3.3% expansion in the year leading up to July. This reading further deviated from the Federal Reserve’s target annual inflation rate of 2%, sparking concerns that the central bank might remain resolute in its hawkish stance, subsequently impacting gold’s performance.
By the end of Thursday’s session, the most active December contract for gold futures on the New York Comex settled at $1,965.90 per ounce, reflecting a decrease of $7.10 or 0.4% for the day. It had reached a five-week peak of $1,977.05 during Wednesday’s trading session. Throughout August, gold experienced a decline of 2% in its settlement.
The spot price of gold, a metric closely monitored by some traders in comparison to futures, exhibited a minor decrease of $1.85 or 0.1%, reaching $1,940.56 per ounce by 16:05 ET (20:05 GMT). Spot gold had achieved a four-week high of $1,949.05 on Wednesday, yet suffered a loss of 1.2% over the course of August.
Craig Erlam, an analyst at the online trading platform OANDA, highlighted recent U.S. data as a factor buoying gold’s performance in recent days. He particularly emphasized the employment figures which, if coupled with weak data in the following days, could potentially signify vulnerabilities emerging in the labor market.
Erlam stated, “We’re not talking about anything too substantial at this point but certainly less heat which the Fed will be comforted by, potentially enough to pause again in a few weeks,” alluding to the Federal Reserve’s impending decision on interest rates on September 20.
Inflation in the United States has notably receded after the Federal Reserve implemented one of the most assertive monetary tightening strategies in its history over the past 18 months. This approach was a response to runaway inflation prompted by the coronavirus pandemic and the substantial relief expenditures associated with it.
Since March 2020, the central bank has incrementally raised key lending rates by a total of 5.25%, previously at a mere 0.25%. Consequently, inflation gauged by the Consumer Price Index (CPI) has descended from an annualized peak of 9.1% in June 2022, which represented a four-decade high.
However, despite these efforts, the Federal Reserve has encountered challenges in returning key inflation indicators to the pre-pandemic levels of 2% and below. The central bank attributes this phenomenon to unexpectedly robust growth in employment and wages since the onset of the COVID-19 outbreak, sustaining robust consumer spending.
