Gold Pares Post-NFP Losses While Stocks See Weekly Gains
Last week, gold saw a modest decline following upbeat U.S. economic data, which cast doubt on near term interest rate cuts. This week, precious metals and other markets were driven by Fed policy updates, developments in the Middle East, and employment news.
Gold and silver started the week at $2,027 and $22.93, respectively. Both saw a modest uptick on Monday, amid concerns of a worsening conflict between the U.S. and Iran/Iranian proxy groups. U.S. equities jumped on Monday and neared record highs, ahead of big earnings from tech companies like Microsoft and Alphabet.
Gold saw little movement on Tuesday at $2,035, as investors anticipated Fed Chair Jerome Powell’s upcoming interest rate announcement. On Wednesday, Powell made the much-anticipated announcement that rates would stay unchanged at 5.25% -5.5%.
While this move largely expected, the Fed Chair shed significant doubt on a rate cut in March. Following his remarks, the odds of a March rate cut fell to 37%, according to the CME FedWatch Tool. In his speech on Wednesday, Powell maintained that inflation was a key metric when considering rate cuts, and that there was no guarantee of a rate cut in May.
Stocks plummeted as Powell’s comments were perceived as more hawkish than what many had anticipated. On Wednesday, the Nasdaq Composite fell by 2.2%, which was its most significant daily downturn in over a year. Gold remained in a narrow range around $2,035 following the policy update, while silver hovered near $23.20.
Gold rallied to a 1-month high near $2,063 on Thursday, as Middle East tensions led to safe-haven buying. On the same day, Wall Street stocks bounced, following Wednesday’s sharp sell-off. Meanwhile, investors braced for Nonfarm payroll data, which was set for release this morning.
Today, the Bureau of Labor and Statistics released payroll data, which showed that the U.S. economy added 353,000 Nonfarm payrolls in January. This far exceed economists’ expectations of 185,000 and further dented rate cut odds. Fed hawkishness meant that gold and silver would see sharp sell-offs this morning. At the same time, the benchmark 10-year Treasury yield surged 4.04%, which further dented gold’s appeal.
At this point, gold has managed to pare some of this morning’s losses. The yellow metal is currently near $2,037 which, if maintained, would be a modest weekly uptick of $10 an ounce. In a similar move, silver bounced after this morning’s initial drop, but is eying a 1% weekly loss, at $22.68 an ounce.
Despite the perceived Fed policy shift, stocks jumped this morning on the heels of strong quarterly earnings from companies like Amazon and Meta. As this is written, the Dow Jones Industrial Average and S&P 500 are eyeing the most significant weekly gains at 1.3% and 1.4%, respectively. Even following Wednesday’s historic downturn, the Nasdaq is 0.8% higher for the week.