Metals Stocks: Gold posts lowest finish in more than 3 weeks after a stronger than-expected U.S. jobs report
Gold futures dropped below $1,900 an ounce on Friday as a much better-than-expected U.S. monthly jobs report pushed up Treasury yields and the dollar, pulling prices for the precious metal to their lowest finish in three weeks.
Gold for April delivery
fell $54.20, or 2.8%, to settle at $1,876.60 an ounce on Comex. Prices for the most-active contract settled at their lowest since Jan. 10, according to Dow Jones Market Data. For the week, they lost 2.7% — the largest one-day drop since June 17, 2021.
shed 5.1% to $22.405 an ounce, ending nearly 5.2% lower for the week.
fell 5.1% to $980.30 an ounce, Prices, which marked their lowest finish since December, lost 3.6% for the week. March palladium
shed 1.5% to $1,618.40 an ounce, for a weekly rise of 1.2%.
fell 0.8% at $4.0565 a pound, ending the week 3.9% lower.
Gold took a hit Friday because “the positive surprise on the jobs number is a strong indication that the [Federal Reserve] has more than a single rate hike left in it,” said Brien Lundin, editor of Gold Newsletter.
The yellow metal was hit harder than equities because “it’s been outperforming stocks over the last few months,” he told MarketWatch. Profits were taken by “those who have enjoyed that ride.”
The number of new jobs created in January rose by 517,000 to mark the biggest increase in six months. The increase was much stronger than the 187,000 forecast of economists polled by The Wall Street Journal. The unemployment rate slid to a 54-year low of 3.4% from 3.5%, the government said Friday.
For now, the Fed’s Federal Open Market Committee “has the license to keep raising [interest] rates,” said Jason Schenker, president of Prestige Economics.
The news led to a rally in the U.S. dollar, with the ICE U.S. Dollar index
up 1.2% at 102.92 in Friday dealings.
Rising interest rates act as a weight on gold, with higher yields on bonds raising the opportunity cost of holding non-yielding assets like gold. A stronger dollar, meanwhile, can make prices of commodities priced in the unit more expensive to users of other currencies.
So far in 2023, however, gold has climbed nearly 3%, finding support as Treasury yields pull back and the dollar has softened amid expectations the Fed is nearing the end of an aggressive cycle of interest rate hikes.
Read: Why silver is outperforming gold
The Fed on Wednesday approved a quarter-percentage-point increase in its policy interest rate. Federal Reserve Chair Jerome Powell said a “couple more hikes” are likely before the central bank takes a breather in its fight against inflation.
In the news conference that followed the announcement, Powell offered commentary that investors took as meaning fewer futures rate increases were ahead than many market participants had expected. Still, he did say that the Fed would have to “keep rates higher for longer” as it waits to see how fast inflation comes down.
The European Central Bank and Bank of England also delivered rate increases this week.
Three major central bank decision this week have resulted in a roughly 2% trough-to-peak rally in the dollar over the past two sessions, and that has “promoted a wave of profit taking in gold as the yellow metal was in overbought territory ahead of the Fed decision” that was announced Wednesday, Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.