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Gold edges lower after Fed’s rate decision

Friday, May 03, 2024

Today’s headlines

What’s happening: Gold prices edged lower on Thursday, after the US Federal Reserve announced its policy decision.

What happened: The yellow metal has been on a broader uptrend, rising around 20% over the past year and recording gains on Wednesday.

Global demand for gold continues to be strong, which limited the overall losses for the safe-haven metal on Thursday.

Why it matters: The Federal Reserve kept its benchmark interest rates unchanged for a sixth consecutive meeting. This move was in-line with expectations, given sticky inflation in the US. Fed Chairman Jerome Powell said during the press conference on Wednesday that a rate hike was unlikely despite concerns around inflation.

Traders now widely expect at least one rate cut by the US central bank this year. Lower rates generally raise the appeal of holding non-yielding gold.

The US employment cost index came in above market expectations, indicating robust wage growth, which lowers the urgency for the Fed to cut rates. The US trade deficit came in almost unchanged at a ten-month high of $69.4 billion in March, slightly higher than market expectations of $69.1 billion. Exports fell 2% in the month, while imports declined by 1.6%.

The World Gold Council said global demand for the yellow metal had risen by 3% on an annual basis to 1,238 metric tons during the first quarter, marking the strongest start to a year since 2016. Gold demand in India, one of the biggest buyers of the yellow metal, rose by 8% in the March quarter.

Weakness in the US dollar lent some support to gold prices on Thursday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.4% to 105.30 during the session.

Gold for June delivery shed $1.40 to close at $2,309.60 per ounce on Thursday.

In other metals trading, silver for July delivery added 8 cents to $26.83 per ounce. Copper fell 7 cents to $4.48. Platinum rose to $962.6 after surging to a two-week high earlier during the session, while palladium settled lower at $939.10.

What to watch: Investors await the release of nonfarm payrolls data from the US, which is expected to significantly impact the Fed’s monetary policy and provide direction to gold prices. The US economy, which added 303,000 jobs in March, is expected to add 243,000 jobs in April. Analysts expect the unemployment rate to remain unchanged at 3.8% in the month.

Geopolitical concerns also remain in focus, as the recent easing in tensions has lowered gold’s appeal as a safe-haven asset.

The markets today

The Kraft Heinz Company’s shares will be in focus today after the company released its first-quarter results

Context: Shares of Kraft Heinz gained on Thursday following mixed results for the latest quarter.

Details: The packaged food maker missed sales expectations for the first quarter, signalling that customers are pushing back against higher priced products amid sticky inflation in the US.

Overall volumes shrank 3.2 percentage points during the latest quarter, while prices increased 2.7 percentage points across the company’s portfolio.

The company’s quarterly sales contracted by 1.2% year-over-year to $6.411 billion, missing consensus estimates of $6.429 billion. Adjusted earnings came in at 69 cents per share, in-line with Wall Street expectations.

Sales in North America fell 1.2% year-over-year, while International Developed Markets declined 0.6%.

Kraft Heinz’s gross profits rose by 6.2% year-over-year to $2.24 billion, while margins expanded by 240 points to 35%.

“Our Agile@Scale methodology continues to fuel reinvestment in the business, helping to deliver against our gross efficiency target. These reinvestments are powering innovation, brand superiority, disruptive marketing, sales excellence, and further productivity to drive growth,” CEO Carlos Abrams-Rivera said during the earnings call.

Management reiterated their full year adjusted earnings forecast of $3.01 to $3.07 per share as well as the organic revenue growth outlook of 0% to 2%.

How shares responded: Kraft Heinz’s shares gained 1.2% to close at $36.72 on Thursday, following the release of quarterly results. The stock has added more than 10% over the past six months.

What to watch: Investors will continue monitoring overall inflation levels in the US, which is expected to impact Kraft Heinz’s results ahead.

Other Markets: European indices closed mostly lower on Thursday, with the DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.20%, 0.88% and 0.22%, respectively, and the FTSE 100 up by 0.63%.

The news shaping the markets

The US State Department accused Russia of using chemical weapons against Ukraine’s military forces. The news sent the RUB/USD pair lower in forex trading this morning.


Australia’s home loans rose by 2.8% to A$17.48 billion in March, topping market estimates of 1.0% and lending support to the AUD/USD forex pair.


Argentina’s central bank cut its benchmark interest rate by 10 percentage points to 50% at its latest meeting, which sent the ARS/USD pair lower in forex trading this morning.


Ireland’s AIB services PMI fell to 53.3 in April, from 54.4 in the prior month. Services activity remaining in the expansion zone lent support to the EUR/USD forex pair.


Mexico’s S&P Global manufacturing PMI fell 1.2 points to a reading of 52.2 in April, sending the MXN/USD pair lower in forex trading this morning.

What else to watch today

France’s industrial production and government budget value, Spain’s unemployment change and tourist arrivals, Turkey’s inflation rate, producer price inflation, foreign exchange reserves and balance of trade, Brazil’s IPC-Fipe Inflation, industrial production and value of outstanding loans, Italy’s unemployment rate, UK services PMI and composite PMI, Eurozone’s unemployment rate, India’s value of loans, deposit growth and foreign exchange reserves, Mexico’s gross fixed investment and government budget value, Canada’s composite PMI and services PMI, US S&P Global services PMI, S&P Global composite PMI, ISM services PMI, Baker Hughes crude oil rigs, Baker Hughes total rigs, Logistics Manager’s Index and total vehicle sales, South Africa’s total vehicle sales, Russia’s business confidence, Argentina’s tax revenue, as well as Germany’s new passenger car registrations.


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