Global gold prices rose on Tuesday, reaching levels close to their recent peak. The rise came after comments from the US Federal Reserve Chairman on interest rates, as investors look ahead to upcoming labor data this week for additional insights. Federal Reserve Chairman Jerome Powell indicated that the central bank is likely to cut interest rates by a quarter percentage point in the future. The fresh data has boosted confidence in economic growth and consumer spending.
“Focus will continue to be on upcoming labor market data, as they are expected to be key indicators of policymakers’ decisions,” said Yip Jun Rong, a market strategist. “Any weaker-than-expected labor market data could bolster views on rate cuts, which could support gold prices,” Rong added.
This week’s data includes US ADP employment figures and nonfarm payrolls data, which will shed light on the health of the labor market. Fed officials are also expected to speak alongside the JOLTs job openings data later today. According to the US interest rate tracker available on Investing Saudi Arabia, markets are currently pricing in a 25 basis point rate cut in November at around 62%, up from 47% last Friday.
Gold, which does not yield, tends to rise in a low interest rate environment. Bullion posted its best quarterly gain since 2020 on Monday, after the Federal Reserve kicked off its rate-cutting cycle with a half-point move at its September meeting. Factors Limiting Future Gains
Goldman Sachs (NYSE) said on Monday that the rise in gold prices could face challenges. Among these challenges are lower demand from central banks due to declining geopolitical tensions, in addition to declining inflows of exchange-traded funds and stagnant demand for gold in China.
Gold Futures Prices
Gold futures prices declined during Monday’s trading. However, the yellow metal achieved its best quarterly performance since early 2020, achieving a gain of 23.1% since the beginning of the year. At settlement, December contracts fell 0.35% to reach $2,659.4 per ounce but recorded monthly and quarterly gains of 5.2% and 11.5%, respectively.
Spot Gold Prices and the Dollar
Spot gold rose yesterday by 0.3% to reach $2,641.33 per ounce, after reaching a record high of $2,685.42 on Thursday. Also, U.S. gold futures rose by 0.2%, To record $2663.10.
On the other hand, the US dollar index contracts settled at 100.50 points.
Other metals performance
Spot silver rose 0.7% to $31.36 per ounce. Platinum also rose 0.9% to $984.95, while palladium settled at $1000.
Jerome Powell: Economic data determines Fed decisions
Jerome Powell confirmed that economic data is the main driver of the Federal Reserve’s decisions. Decisions are made separately at each meeting based on the economic situation. He indicated that if things go as expected, the interest rate cut will be by 25 basis points in November and 25 basis points in December, according to the dot plot. This statement gives support to investors and traders to expect a 25-basis point cut at the next meeting, reducing bets on a 50-basis point cut. Expectations will remain tilted towards a 25-basis point cut until the release of labor data next Friday. If the data is positive and close to expectations, expectations will confirm a 25-basis point cut. However, if the data shows weak employment or a rise in the unemployment rate, expectations of a 50-basis point cut may return to the forefront.
Impact of the situation in China and the future outlook for gold prices
Hansen noted that the economic situation in China could significantly impact the momentum in the gold market. Demand from the middle class in China remains high, as gold is seen as a safe haven amidst the pressures of the stock market and falling property prices.
Expected Pause
On the other hand, Adrian Day, head of asset management at Adrian Day, confirmed that the market may see a temporary pause after the strong rally. Day said: “The pause is expected after this rally, especially after the Fed cut interest rates.”
Gold Prices Outlook
For the next six to 12 months, Day expressed his optimism about the gold market. He expects Western investors to start buying gold more. However, he noted that markets do not rise permanently, reflecting the nature of volatility.
Performance of other metals
Spot silver fell 0.4% to $31.49 per ounce, after hitting a 12-year peak. Silver is expected to achieve a quarterly increase of 8%. While platinum fell 0.1% to $999.35, palladium rose 0.1% to $1,012.50.
Economics Monitor
Despite the recent decline, gold and other metals prices continue to reflect market volatility due to multiple factors. The market is following economic developments and their potential impact on precious metals prices. Investors are watching economic and political factors, which affect future price movements.
Jerome Powell Speech
Federal Reserve Chairman Jerome Powell and Governor Michelle Bowman are expected to deliver speeches later today. Waterer added: “If Powell’s message keeps investors optimistic, the US dollar could suffer while gold could benefit again.”
US Economy and Inflationary Pressure
Data on Friday showed that the US economy maintained some momentum in the third quarter. Inflationary pressures continued to ease, reinforcing expectations for another large rate cut at the Federal Reserve’s November meeting.
