Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold gained 0.8% to close above $2,048 on downbeat US and China data ahead of the Fed’s decision on monetary policy. The metal then gave up a portion of those gains in after-hours trading when Jerome Powell pushed back on the prospect of a March rate cut.

The ADP reported private-sector employment rose by a meager 107,000 jobs in January, well under forecasts of around 150,000. The more definitive US nonfarm payrolls report, due Friday, will give a more dependable view of the labor market.

Separately, the government reported that the Employment Cost Index, a gauge of the overall cost of employing people, rose only 0.9% in Q4. The Fed pays careful attention to the index as a weathervane of future inflation.

The Chicago Business Barometer contracted again in January, signaling ongoing weakness after an uptick in November following the end of the UAW auto strike. So far, soft regional Fed surveys suggest a weaker national outlook for manufacturing.

China’s official manufacturing PMI shrank again in January, posting four straight months of contraction. With the world’s second largest economy still struggling after Covid-related closures, China’s central bank is expected to announce new stimulus measures in coming months.

As expected, the Fed left interest rates unchanged today at the conclusion of its meeting. Its policy statement was neutral, both hawkish and dovish, about the prospect of cutting interest rates. In his post-meeting comments, however, Fed Chair Powell was less equivocal, saying “we want greater confidence” that inflation is contained” before the first cut, and “not March” to its timing.

The dollar initially retreated but then perked up after Powell’s comments, pushing spot gold back down to around $2,035 as traders recalibrated toward May for the initial rate cut.

Benchmark 10-year Treasury yields fell near 3.9% before the statements and remained there afterward, supporting gold by reducing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The other precious metals were mixed, with silver sliding 0.3% while platinum was nearly flat, and palladium rose 1.8%.

At the New York spot close: gold gained $16.90 to $2,048.40; silver slipped 6 cents to $23.05; platinum inched down ninety cents to $932.60; and palladium climbed $17.30 to $996.80 an ounce.