Market Update | 30/08/2023

Gold hits a One-Month High as Weak Economic Data Raises the Prospects of a Federal Reserve Pause

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Today's Observations

Gold consolidated in Asia and Europe after its recent gains, trading between $1919 and $1925. However, it eased to a low of $1915 just ahead of the New York opening and the release of the latest Job Openings and Labor Turnover Survey (JOLTS) report. The JOLTS report is seen as an early indication of the closely watched United States employment report due out on Friday. In the event, job openings fell to the lowest level since March 2021. This, combined with a weak United States Consumer Confidence report, raised hopes of a 'Federal Reserve pause' in September. It also sparked a sharp rally in gold to a four-week peak of $1938 on good volume amid declines in the United States Dollar (USD) and United States 10-Year Treasury yields. The yellow metal ended just off the highs and up 0.89% at $1937 and has held on to its gains in Asia so far this morning, hovering between $1935 and $1938. We can expect another active session today with a raft of United States economic reports due to be published, headlined by the latest Gross Domestic Product (GDP) data, with a potential trading range of $1930 to $1950. Silver continued its resurgence to reach a one-month high of $24.80 before ending up 2.06% at $24.73. Platinum gained 1.13% to end near the highs at $984, but palladium ended with a marginal 0.16% loss at $1250.

Market Commentary

August 30, 2023 (Reuters) - Gold prices on Wednesday hovered near their highest levels in three weeks after lackluster United States jobs openings and consumer confidence data assuaged bets of interest rate hikes by the Federal Reserve this year. Spot gold held its ground at $1,936.59 per ounce by 0115 Greenwich Mean Time (GMT), trading close to its highest levels since August 7, hit on Tuesday. United States gold futures steadied at $1,964.30. United States Treasury yields dropped to three-week lows on Tuesday after the data, and the dollar also weakened, making gold less expensive for other currency holders. Lower rates burnish demand for the non-interest-paying gold. United States job openings dropped to the lowest level in nearly two and a half years in July as the labor market gradually slowed, bolstering expectations that the Federal Reserve will keep interest rates unchanged next month. United States consumer confidence fell more than expected in August after two straight monthly increases amid renewed concerns about inflation, a survey showed on Tuesday. Investors are now awaiting the Commerce Department's second take on April-June GDP later in the day, personal consumption expenditures price index on Thursday, and the non-farm payrolls report on Friday. The United States Federal Reserve is unlikely to provide clear signals on whether it will pause interest rate hikes or consider cutting rates, barring severe economic weakness or disinflation, former central bankers said on Tuesday. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.3% to 889.23 metric tons on Tuesday. Elsewhere, spot silver fell 0.2% to $24.68 per ounce, but was hovering close to a one-month high. Platinum eased 0.1% to $975.14, having climbed to its highest level since July 19 in the previous session. Palladium shed 0.3% to $1,245.44.

Economic Analysis

Job Openings and Labor Turnover Survey (JOLTS) - The number of job openings declined by 338,000 from the previous month to 8.827 million in July 2023, marking the lowest level since March 2021 and falling below the market consensus of 9.465 million. It also represented the third consecutive month of decline in job openings, indicating that the labor market is gradually slowing after months of unprecedented monetary policy tightening by the Federal Reserve. The level of job openings decreased in professional and business services (-198,000); health care and social assistance (-130,000); state and local government, excluding education (-67,000); state and local government education (-62,000); and federal government (-27,000). In contrast, there were increases in information (+101,000) as well as in transportation, warehousing, and utilities (+75,000). Regarding regional distribution, job openings declined in the South (-356,000) and the Midwest (-69,000), while they rose in the West (+57,000) and the Northeast (+29,000). Source: United States Bureau of Labor Statistics.

Gold Chart ($/oz)

Silver Chart ($/oz)

Platinum Chart ($/oz)

Palladium Chart ($/oz)

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