Gold still ended with a gain for the week and August, even though itfell off from a record high mid session Friday as the US dollar and US bond yields tightened after the key US inflation measure came in on forecast and brought a rate cut closer in 10 days time.
The only proviso so far as the US Federal reserve is concerned is the health of the US jobs market which will be tested with the August jobs figures on Friday (around 175,000) – and the weak July figures of 114,000 (which some forecasters think might be revised).
Fed Chair Jerome Powell said 10 days ago that the central bank is ready to begin rate cuts as the labor market cools.
Comex gold for December delivery was last seen down $US32.20 to $US$2,527.60 per ounce, dropping from Thursday’s record close of $US2,560.30.
The Bureau of Economic Analysis reported that the July Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, rose 0.2% in July from June, matching all market surveys. The core rate, excluding volatile items, was also up 0.2% monthly and an annual 2.6%, under expectations for a 2.7% rise.
That’s a big positive for a rate cut to be announced on September 18 – a weak jobs report would make it a certainty and raise speculation of a half a per cent cut -but that in turn would set off another round of ‘the recession is here’ commentary from the usual hennypennies in the markets.
“Gold is benefitting from uncertainty on top of the widely expected rate cuts – making for a perfect storm of sorts, and one that seems to have legs in our view. As our conviction on caution continues to suffer and the rate-driven nature of gold’s rise makes its data dependency ever more entrenched, this week’s inflation figures and next week’s US employment report will be watched closely for gold implications, namely via the dollar and rates in particular,” Christopher Louney, a commodities strategist at RBC Capital Markets, wrote in a note on Friday.
The dollar rose following the inflation data, with the ICE dollar index last seen up 0.38 points to 101.73. The US dollar index fell 1.4% in August.
The Aussie dollar ended at 67.64 cents, down half a per cent for the week but up a solid 3.89% for August – one of the biggest monthly moves for some time.
The Aussie dollar gold price ended at $A3,700 on Friday, according to the World Gold Council.
And Comex copper was up nearly 2% last week to end at $US4.22 a pound which was also a gain of 3.7% for August.
US Treasury yields also rose, with the two year bond last seen paying 3.931%, up 2.9 basis points, while the yield on the 10-year benchmark bond was up 4.3 points to 3.908%