Gold prices slipped on Thursday as encouraging weekly U.S. jobless claims data strengthened bets for an earlier-than-expected rate hike by the Federal Reserve following recent strong inflation data out of the United States.
· Despite the drop in prices, bullion was still holding near its highest level in five months, hit on Tuesday.
· “One of the major reasons for this spike in gold was that rates fell off pretty hard. But then, they came bouncing back, so that’s keeping the upside limited in gold,” said Daniel Pavilonis, a senior market strategist at RJO Futures.
· The number of Americans filing new claims for unemployment benefits fell close to pre-pandemic levels last week, data showed on Thursday. Any signs of a recovering economy reduces the demand for the safe-haven metal.
· “It just correlates with a higher probability of the Fed actually having to raise rates,” Pavilonis said.
· U.S. Treasury yields held near recent three-week highs , while the U.S. dollar paused for breath, slipping back from a 16-month peak. A weaker dollar makes gold more attractive for buyers holding other currencies.
· Bullion, considered a hedge against inflation, has gained on surging consumer prices in the U.S. and Europe. But that has also bolstered bets for early interest rate hikes, which would increase the opportunity cost of holding non-yielding gold.
· “At the moment, it’s difficult for gold to find direction because of the uncertainty related to the dollar’s performance, and the likely response of the Fed and other central banks to inflation,” said ActivTrades senior analyst Ricardo Evangelista.
· Elsewhere, platinum slipped 1.4% to $1,042.88 per ounce, while palladium was 1.4% lower at $2,157.17
· Silver fell 1.1% to $24.78 per ounce.
· Jobless claims little changed in potential sign that layoffs have hit a plateau
First-time claims for unemployment insurance were little changed over the past week, indicating the heightened pace of layoffs during the pandemic may have hit a plateau, the Labor Department reported Thursday.
Initial filings for the week ended Nov. 13, totaled 268,000, a decline of 1,000 from a week ago and slightly higher than the Dow Jones estimate for 260,000.
The total was the lowest since the beginning of the pandemic but in close keeping with where claims have been over the past month.
The four-week moving average, which smooths out weekly volatility, declined to 272,750, just a bit above the total for the most recent weekly count.
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Continuing claims, which run a week behind the headline number, declined by 129,000 to 2.08 million, also a pandemic-era low dating back to March 14, 2020.
A separate report Thursday brought some strong news for manufacturing and more signs of inflation.
The Philadelphia Federal Reserve’s gauge of monthly activity in the sector jumped 15 points to 39, representing the percentage differential between companies reporting expansion and contraction. That was well above the Dow Jones estimate for 23, propelled by increases in employment and prices paid and received.
· Dollar takes a breather, edges back from 16-month peak
The dollar edged back from a 16-month high on Thursday as traders assessed whether the U.S. currency’s recent surge, fueled by diverging central bank tightening expectations amid surging inflation around the globe, had gone too far.
The dollar index, which measures the currency against a basket of six rivals, reached its highest since mid-July 2020 on Wednesday at 96.226, but was last down 0.272% at 95.553.
The euro rose 0.45% to $1.13695, bouncing off of a 16-month low hit on Wednesday below $1.13.
Sterling edged up 0.1% versus the greenback to $1.3494, having jumped 0.5% on Wednesday after data showing rising inflation in Britain last month piled pressure on the Bank of England to hike interest rates at its meeting next month.
· Fed policymakers start penciling in earlier U.S. rate hikes
Federal Reserve policymakers are penciling in the possibility of earlier interest rate hikes than they thought would be needed just a few months ago, as inflation continues to soar and the economy picks up speed.
The shift comes as President Joe Biden nears a decision on whether to keep Jerome Powell as Fed chair for another term, or to elevate Governor Lael Brainard to that post instead. Earlier this week Biden signaled he could make an announcement on Friday.
· Fed to hike in Q4 next year; inflation to remain above target until 2024: Reuters poll
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The Federal Reserve will raise interest rates late next year, earlier than expected just a month ago, in a landmark shift from the emergency measures it took to backstop the U.S. economy during the COVID-19 pandemic, according to a Reuters poll.
· U.S. to start raising interest rates from Sept 2022 - JP Morgan
The U.S. Federal Reserve will start raising interest rates from September 2022, economists at the country's biggest bank said in a 2022 outlook note.
JPMorgan expects the central bank to raise rates by 0.25% from the third quarter of next year and keep raising them by 25 basis points every quarter "at least until real rates are at zero," the team led by chief economist Mike Feroli wrote.
· Biden’s social and climate plan is set for a House vote after a CBO analysis said it would slightly boost the deficit
· Turkish lira hits all-time low before country’s central bank meeting
The Turkish lira on Thursday continued its slide ahead of the country’s central bank meeting.
The currency fell to a record low of 10.98 against the dollar, but pared some losses to trade at 10.72 on Thursday afternoon in Asia.
The central bank is expected to cut rates by 100 basis points to 15%, according to a Reuters poll.
· U.S. discussing joint reserves release with China, others in aim at OPEC
· OPEC+ plans to meet on Dec. 2. The group has taken a slower approach to boosting output, viewing the economic recovery as too fragile to justify more supply.
· Biden says U.S. considering diplomatic boycott of Beijing Olympics
· Report shows China's growing clout at World Bank, global institutions
With over $66 billion in total capital, China has passed Japan to become the second largest contributor to the system of development banks that provide some $200 billion in subsidized loans to poor countries each year, a new report said Thursday.
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