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Gold loses shine after US NFP data release

Monday, June 10, 2024

Today’s headlines

What’s happening: Gold prices fell sharply on Friday as investors assessed the latest non-farm payrolls (NFP) data from the US.

What happened: Stronger-than-expected jobs data from the US resulted in gold recording its weakest settlement in about a month.

A report showing that China’s central bank had halted its bullion purchases last month also exerting pressure on the safe-haven metal.

Why it matters: Gold prices were already under pressure ahead of the release of the US NFP report, with news from China regarding a halt in bullion purchases.

The People’s Bank of China decided to pause its 18-month gold purchase plan in May, weighing on the yellow metal. The PBOC’s holdings of the bullion remained unchanged at 72.80 million troy ounces in May, according to Bloomberg.

Data from the US showed the economy added higher-than-expected new jobs in May, which lowered speculations of the Federal Reserve slashing interest rates soon.

The Labor Department said nonfarm payrolls increased by 272,000 in May, the most in five months. The figure was also better than market estimates of 185,000 job adds. The average hourly earnings for all employees rose by 0.4% to $34.91 in May, faster than the 0.2% increase recorded in April.

Speculations are now for the Fed to cut its benchmark interest rates by around 37 basis points (bps) by the end of December, versus earlier expectations of 48 bps. Markets now expect the US central bank to announce its first rate in November, versus earlier speculations of September. A higher interest rate raises the opportunity cost of holding the non-yielding gold.

Strength in the US dollar also exerted pressure on gold prices, as a higher greenback makes metals more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained 0.8% to 104.94 on Friday.

Gold for August delivery dipped $65.90, or 2.8%, to close at $2,325 an ounce on Friday. This marked the worst single-session percentage plunge in gold prices since April 22 and the weakest closing since May 8. Gold prices dipped more than 1% last week, recording losses for the third straight week.

In other metals trading, silver for July delivery tumbled $1.93 to close at $29.44 per ounce, while July copper declined 20 cents to $4.48 per pound. Platinum fell sharply to $971.1, while palladium closed lower at $923.60.

What to watch: Investors await the release of inflation data from the US this week, which is expected to provide further insights into the Fed’s future monetary policy. The annual inflation rate in the US, which slowed to 3.4% in April from 3.5% in March, is expected to remain at 3.4% in May. However, the core inflation rate is projected to ease to 3.5% in May, from 3.6% in the previous month.

The markets today

European stocks will be in focus today after closing lower on Friday

Context: Markets in Europe settled lower on Friday, as investors digested the US jobs report and the ECB’s latest interest rate decision.

Details: The European Central Bank announced plans on Thursday to lower its interest rates for the first time since 2019, despite lingering inflation concerns. This brings the region’s key bank rate down from 4% to 3.75%.

Recent data showed the Eurozone economy expanded by 0.3% during the first three months of 2024, rebounding from a 0.1% contraction in the prior quarter. This also marked the strongest growth since the third quarter of 2022.

Data from the Bundesbank showed Germany’s economy is expected to expand at a slower-than-expected rate in 2024. Europe’s biggest economy is now projected to grow by 0.3%, down from the earlier expectation of 0.4%.

A stronger-than-expected jobs report from the US fuelled speculations of the Fed further delaying rate cuts, which impacted investor risk sentiment. The US added non-farm payrolls of 272,000 in May, compared to 165,000 in April.

The STOXX Europe 600 Index declined 0.22% to close at 523.55 on Friday, with most sectors closing in the negative zone. Utilities stocks dipped around 1%. Healthcare stocks bucked the overall market trend, adding around 0.5% during the session.

London’s FTSE 100 fell 0.48% to settle at 8,245.37 on Friday, recording losses for the fourth week in a row. Germany’s DAX 40 and France’s CAC 40 lost 0.51% and 0.48%, respectively.

What to watch: Investors await the release of Eurozone’s inflation expectations today. Median expectations for inflation over the next 12 months for the Eurozone, which eased to 3.0% in March from 3.1% in February, are projected to decline further to 2.8% in April.

Data on industrial production and balance of trade from the Eurozone, due to be released later this week, will also remain in focus.

Other Markets: US trading indices closed lower on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.22%, 0.11% and 0.11%, respectively.

The news shaping the markets

During a meeting in Paris, leaders of the US and France reaffirmed their support for Ukraine in its ongoing war against Russia. The news sent the safe-haven US dollar index higher in forex trading this morning.


Japan’s GDP contracted by 0.5% in the first quarter, compared to a 0.1% expansion in the fourth quarter, exerting pressure on the JPY/USD forex pair.


Ireland’s BNP Paribas real estate construction PMI fell to 49.8 in May, versus 53.2 in the previous month. This being the first contraction in the region’s construction output in three months sent the EUR/USD pair lower in forex trading this morning.


Saudi Arabia’s economy shrank by 1.7% year-over-year in the first quarter, compared to a 4.3% decline in the earlier period. This being the third consecutive quarter of annualised economic contraction exerted pressure on the SAR/USD forex pair.


Brazil’s car production dipped by 24.9% to 166,700 units in May, compared to a 13.5% gain in the prior month, which sent the BRL/USD pair lower in forex trading this morning.

What else to watch today

Saudi Arabia’s industrial production, Turkey’s industrial production, jobless rate, current account and labour force participation rate, Italy’s industrial production, as well as Central Bank of Brazil’s focus market readout.


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