Gold futures settled higher on Thursday, recouping most of losses from a day earlier that pulled prices to their lowest finish in just over a week.
The precious metal found support from weakness in the U.S. dollar following U.S. data showing a weekly rise in the number of people who applied for unemployment benefits to a nearly two-year high.
Price action
-
Gold for August delivery
GC00,
-0.15% GCQ23,
-0.15%
rose $20.20, or 1%, to settle at $1,978.60 an ounce on Comex after losing 1.2% on Wednesday. Prices for the contract eye a weekly rise of around 0.5%, FactSet data show. -
July silver
SIN23,
+0.19%
climbed 82 cents, or 3.5%, at $24.35 an ounce. -
July platinum
PLN23,
-0.07%
fell 1% to $1,013.90 an ounce, while September palladium
PAU23,
-3.11%
lost 2.1% at $1,358.30 an ounce. -
July copper
HGN23,
-0.62%
rose 1% to $3.80 a pound.
Market drivers
U.S. jobless claims rose 28,000 to 261,000 for the week ended June 3, the Labor Department reported Thursday.
The ICE U.S. Dollar index
DXY,
declined by 076% to 103.35 following the data, raising the appeal of dollar-denominated gold.
The rise in jobless claims helps support the possibility that the Federal Reserve will not increase interest rates at their policy meeting next week.
“Expectation is mounting that the U.S. central bank will hit pause on its interest rate hikes,” said Rupert Rowling, market analyst at Kinesis Money, in market commentary, ahead of the jobless claims data. However, “investors and traders are reluctant to fully commit their funds until this does indeed prove accurate.”
“The fact that gold continues to trade at such high levels, that although they may be about $100 lower than gold’s early May peak, are still at a range seen only a handful of times in the precious metal’s long trading history, reflects the fragile state of market confidence,” he said.
He believes “gold looks set to slide slowly but steadily lower over the coming weeks and months, proving the barometer of investors’ true confidence in the global economic outlook.”
A series of Fed rate hikes that have taken the fed-funds rate from near zero to 5% to 5.25% since March 2022.
Overall, “continued strength in the U.S. labor market, hawkish FedSpeak, and Wednesday’s [Bank of Canada] rate hike have ramped expectations that the Fed will hike by another 25-[basis points] at next week’s FOMC meeting,” Peter Grant, vice president and senior metals strategist at Zaner Metals, told MarketWatch.
Still, gold is showing some “resiliency,” he said, as it trades relatively close to its all-time high. “The underlying trend remains bullish and I still believe we’ll see new all-time highs this year.”
Read: Why U.S. stock-market investors were rattled by the Bank of Canada’s surprise rate hike
In a research note dated Wednesday, strategists at Citi Research, led by Aakash Doshi, reduced their zero- to three-month gold price-point target to $1,915 an ounce from $2,100.
They said “equity [volume] compression, the recent back-up in Treasury yields and bounce [in the U.S. dollar] amid a resolution to an imminent U.S. debt ceiling breach provide a potential cap on near-term gold market cheer.”
Gold remains “a viable macro portfolio tail hedge,” historically and during the current post-pandemic era, despite the hawkish Fed regime, they said. “We believe bullish bullion sector tailwinds will reemerge before end-2023.”
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