Thu, December 08, 2022

US Fed: After Kicking 1-week high, Gold Prices Stable

Pile of Gold bars.

On Thursday in Asia, as traders weighed gains in stock markets and expected a potential rate cut by the U.S. Federal Reserve occurred, gold prices were a little moved.

The Comex division of the New York Mercantile Exchange traded gold futures for August delivery at $1,421.7 a troy ounce, higher 0.06%.

Closing record highs overnight, as pressure was put on the safe-haven gold, global stocks advanced after all three major stock indexes in the U.S.

In a news report, head of fixed income at Simplex Asset Management in Tokyo Noriko Miyoshi said, “Stocks and bonds rallied together as the markets were betting on interest rate cuts at the European Central Bank and the U.S. Federal Reserve.”

She also added, “The pace looks too fast. Investors across the world rushed to take part in the game of yield hunting.”

Meanwhile, supporting the case for rate cuts by the U.S. Federal Reserve, weaker-than-expected data were cited as a tailwind for gold.

The private sector only added 102,000 jobs in June versus the 140,000 that were expected as shown by the ADP payrolls data released overnight.

The ISM non-manufacturing index dropped to 55.1 in June, with factory orders for May down 0.7%, while other numbers were also supportive of the central bank easing monetary policy.

As the opportunity cost of holding the precious metal declines relative to other interest-bearing assets such as bonds, investor appetite for gold strengthens in a falling interest-rate environment.

Cited as supporting the yellow metal was a weaker dollar that is trading near a one-week low against the yen.

Oil Prices Lower than Expected

Sunset at crude oil refinery with pipeline network.

Meanwhile, after the Energy Information Administration reported a set of bearish U.S. crude inventories data, oil prices were down on Thursday in Asia.

U.S. Crude Oil WTI Futures plunged 0.7% to $56.96, with the International Brent Oil Futures slipping 0.7% to $63.38.

A senior commodity analyst, Barani Krishnan said, “This dataset certainly doesn’t look very good for the bulls in a week where serious questions are already being raised about oil demand despite the hype over extended OPEC cuts.”

Released late Tuesday on a separate report by the American Petroleum Institute, inventories fell by 5 million barrels last week.

President of Transversal Consulting Ellen Wald said, “While the market reaction to OPEC’s decision was muted in part because the decision was already expected, the truth is that the market knows OPEC’s quotas are not significantly impacting oil supply.”

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