Gold price falls as private-sector hiring seen lifting Fed rate-hike odds
New York (June 1) Gold prices fell Thursday as a robust snapshot of private-sector hiring provided support for the dollar and backed expectations for a U.S. interest-rate hike later this month—souring investor appetite for the yellow metal a day ahead of the much-anticipated May jobs report.
The payrolls report due Friday is sidelining some investors but it’s largely expected to include strong enough numbers that would all but confirm the Federal Reserve’s willingness to raise interest rates in two weeks, as the central bank has signaled in member speeches.
August gold GCQ7, -0.49% fell $9, or 0.7%, to $1,266.60 an ounce. Prices posted a gain of roughly 0.6% last month.
Futures, however, traded off the session’s lows under $1,264 after the Institute for Supply Management said its manufacturing index edged up a 10th of a point to 54.9% and the IHS Markit U.S. manufacturing PMI showed a fall to an eight-month low of 52.7.
US:GCQ7 >> $1,150$1,200$1,250$1,300$1,350
Gold’s fall toward session lows came “on the back of the stronger ADP payrolls data, as that pointed to robust jobs growth and thus a reason for the Fed to hike rates at its next meeting,” Fawad Razaqzada, technical analyst at Forex.com, told MarketWatch.
But the outlook for gold is uncertain, he said. “Gold has been supported up until now by soft U.S. dollar, but it requires a stock-market correction to push significantly higher from here.”
On Thursday, the ICE U.S. Dollar Index DXY, +0.25% was up 0.2%. A weaker dollar often provides support for gold, while conversely, a stronger dollar tends to dent gold, which is most actively traded in the greenback. Meanwhile, U.S. equities headed higher after posting a gain in May.
Gold settled higher Wednesday, then pulled back in electronic trading as the Fed’s snapshot of economic activity around the country appeared to raise the prospects for June 14 interest-rate hike, expectations that could be further cemented by what’s expected to be a fairly solid May jobs report.
A poll of economists by MarketWatch conducted in advance of the ADP private-sector release, looks for a slight drop in May payrolls (which folds in government hiring as well) to 185,000 from the 211,000 reported a month earlier.
Data on Thursday showed private-sector employers added a seasonally adjusted 253,000 new jobs last month, payroll processor ADP said. Mark Zandi, chief economist for Moody’s Analytics, which helps produce the report, called job growth “rip-roaring.”
Traders are expecting a nearly 87% probability of a U.S. interest rate increase in June, CME Group’s FedWatch tool showed.
Higher interest rates tend to be dollar-supportive, cutting demand for dollar-priced gold for investors using other currencies. Higher rates also weigh on demand for gold, which doesn’t bear interest, in favor of yield-bearing investments.
Metals market declines were even more prominent for silver. July futures SIN7, -0.78% fell 26.1 cents, or 1.5%, to $17.15 an ounce. July copper HGN7, +0.25% traded at $2.587 a pound, up less than a penny, or 0.3%.
July platinum PLN7, -1.86% shed $15.40, or 1.6%, to $934.90 an ounce, while September palladium PAU7, +0.99% added $4.05, or 0.5%, to $820 an ounce.
The SPDR Gold Trust GLD, -0.11% slipped 0.2%, after trading less than 0.1% higher for May, while the iShares Silver Trust SLV, -0.21% fell 0.8% Thursday. The VanEck Vectors Gold Miners ETF GDX, -0.29% fell less than 0.1%.
Source: MarketWatch
