Gold News

Gold and Silver Prices Rise for Week on US Debt Deal as Fed, ECB Vow to Raise Rates Despite Slowdown

GOLD and SILVER PRICES trimmed their weekly gains on Friday after new US jobs data blew past consensus forecasts, reviving expectations for the Federal Reserve to keep raising interest rates in July if not June now that Washington has passed a debt-ceiling deal to avoid default.
With the price of non-yielding gold and silver often moving inversely to interest-rate expectations, "Skipping a rate hike...would allow the [Fed policy] committee to see more data before making decisions about the extent of additional policy firming," said Fed governor and vice-chair nominee Philip Jefferson in a speech yesterday.
"[But any such pause] should not be interpreted to mean that we have reached the peak rate for this cycle."
"I am in the camp increasingly coming into this meeting thinking that we really should skip," added fellow 2023 voting member Patrick Harker of the Philly Fed, also speaking Thursday.
"[But Friday's jobs data] may change my mind."
May's addition to non-farm payrolls blew past consensus forecasts by almost 80% on the Bureau of Labor Statistics' first estimate of 339,000 – the strongest growth since January and more than 50% above March's 28-month low.
The unemployment rate however rose to a 7-month high of 3.7% from April's 5-decade low of 3.4%.
Betting that the Fed will raise its key interest to a 2-decade high of 5.50% in 2 weeks' time rebounded from 1-in-5 towards 1-in-3 according to the CME derivatives exchange's FedWatch tool, down from the 2-in-3 chance seen last Friday but up from 0% chance this time last month.
Chart of futures positioning on the June 2023 Fed rate decision. Source: CME FedWatch
Silver prices had earlier completed their 1st week-on-week rise since the start of May at London's midday benchmark, fixing around $23.89 per ounce to gain 3.2% from last Friday's 10-week low after briefly topping $24 for the first time in a fortnight.
Gold priced in the Dollar meantime cut its weekly gain from 1.8%  – which would have been the steepest rise since mid-March's start to the mini-crisis in US regional banking – down to 0.8% at $1964 per ounce around the 3pm London auction.
The UK gold price in Pounds per ounce slipped 0.6% for the week to £1568 while Euro gold added 0.6% from last Friday at €1828.
"We need to continue our hiking cycle until we are sufficiently confident that inflation is on track to return to our [2.0%] target in a timely manner," said European Central Bank chief Christine Lagarde in a speech.
Eurozone inflation on Thursday came in lower than expected for May at 6.1% per year, the slowest since February 2022, eve of Russia invading Ukraine.
Euro area manufacturing activity meantime shrank at the worst pace in 3 years on the HCOB PMI survey, with the sector creating the fewest jobs in 2.5 years despite energy prices falling.
US manufacturing activity fell for the 6th month in the last 8 according to the S&P PMI survey, while new orders on the ISM's data shrank at the worst pace in 4 months, almost matching January's drop to the weakest since the first-wave Covid Crisis of early 2020.
The services sector across both economies is expected to show continued growth in Monday's PMI survey updates.
"Price movement is confusing buyers," Reuters quotes one gold dealer in major consumer nation India. "Many potential buyers are waiting for the prices to correct."
This week's volatile financial action around the US debt deal – now passed by both the House and the Senate – on Friday saw longer-term bond prices edge back but hold on to most of yesterday's late jump, putting 10-year US Treasury yields on track for their lowest weekly finish in three at 3.66% per annum.
Rates on 4-week T-bills meantime held a drop back to 5.20% after spiking to 2-decade highs above 6.00% last week on fears of a US debt default starting next Monday.
Both the giant GLD gold ETF and the smaller US-listed No.2 the IAU product shrank a little in size on Thursday after marking a 2nd consecutive month of net investor inflows across May.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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