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Gold loses some shine on upbeat US NFP data

 

Monday, February 05, 2024

Today’s headlines

What’s happening: Gold prices fell on Friday on strength in the US dollar following the release of the much-awaited jobs report.

What happened: The greenback and bond yields moved higher on Friday, after the US released upbeat nonfarm payrolls (NFP) numbers, which fuelled speculations of the Federal Reserve keeping rates higher for longer.

Rising geopolitical concerns lent some support to gold and limited the overall losses for the safe-haven metal on Friday.

Why it matters: The US economy added 353,000 jobs in January, higher than the 333,000 job adds in December. The figure also topped market views of 180,000 job adds. The latest figure also represented the biggest gain in employment in around a year, signalling that the US labour market remains tight.

The US unemployment rate came in unchanged at 3.7% in January, lower than the consensus estimates of 3.8%. Average hourly earnings for all employees on US private nonfarm payrolls increased by 19 cents, or 0.6%, to $34.55 in January, higher than market estimates of a 0.3% gain. This also was the steepest increase since March 2022.

Strength in the US dollar exerted pressure on gold prices, as a higher greenback makes bullion more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained 0.9% to 103.96 on Friday, after surging to a seven-week high earlier in the session. Benchmark US 10-year bond yields also moved higher during the session.

Gold futures fell 0.7% to close at $2,057.10 an ounce on Friday.

In other metals trading, silver futures dipped 1.9% to settle at $22.79 an ounce, copper fell 0.9% to $3.8190, platinum lost 2.3% to reach $901.2 and palladium declined by 2.1% to close at $951.00.

What to watch: Investors await the release of economic data on services and composite PMI from the US today. The S&P Global US composite PMI is expected to climb to 52.3 in January, from the prior month’s reading of 50.9. The ISM services PMI, which declined to 50.6 in December, is expected to increase back to 52 in January.

The markets today

European stocks will be in focus today ahead of a basket of major economic reports

Context: European stocks closed mixed on Friday, as investors digested a strong US jobs report.

Details: The US Labor Department’s jobs report showed employers added much higher than expected positions to the payrolls in January, which raised speculations of the Federal Reserve not making interest rate cuts even in May.

On Wednesday, the Fed had kept its benchmark interest rate unchanged, while stating that it will likely maintain rates higher for a longer period. The Bank of England also maintained its interest rates on Thursday.

Data released on Thursday showed headline inflation in the Eurozone easing in January. Core inflation fell to 3.3% in January, from 3.4% in December.

France’s industrial production grew by 1.1% in December, after a 0.5% increase in the previous month.

The STOXX Europe 600 Index rose 0.01% to close at 483.93 on Friday, paring gains after surging around 0.7% earlier during the session. For the week, European stocks were up about 0.4%.

Auto stocks were among the top performers, adding 1.1%, while oil and gas shares declined about 1.4%.

London’s FTSE 100 slipped 0.09% to close at 7,615.54 on Friday, while Germany’s DAX 40 and France’s CAC 40 added 0.35% and 0.05%, respectively.

What to watch: Investors await the release of economic reports on producer price inflation, composite PMI and services PMI from the Eurozone today. The HCOB Eurozone services PMI is expected to decline to 48.4 in January, from 48.8 in the prior month, while composite PMI might edge higher to 47.9 in January, from 47.6 a month ago.

Analysts expect producer prices in the Eurozone to decline by 0.8% in December, following a 0.3% decline in November.

Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.35%, 1.07% and 1.72%, respectively.

The news shaping the markets

The G7 and EU are eyeing the $250 billion in frozen Russian central bank assets as collateral to provide funds to Ukraine. The news sent the RUB/USD pair slightly lower in forex trading this morning.


China’s Caixin General Service PMI fell to 52.7 in January, from December’s five-month high of 52.9, exerting pressure on the CNY/USD forex pair.


Singapore’s S&P Global PMI edged lower to 54.7 in January, from 55.7 in the previous month, which sent the SGD/USD pair lower in forex trading this morning.


Hong Kong’s S&P Global SAR PMI declined to 49.9 in January, from 51.3 in December, which exerted pressure on the HKD/USD forex pair.


Australia’s trade surplus on goods narrowed to A$10.96 billion in December, from A$11.76 billion in the prior month. The latest reading also came in below market estimates of A$11 billion and sent the AUD/USD pair lower in forex trading this morning.

What else to watch today

Russia’s composite PMI and services PMI, Germany’s balance of trade, composite PMI and services PMI, Turkey’s inflation rate and producer prices, South Africa’s S&P Global PMI, Spain’s consumer confidence indicator, composite PMI and services PMI, Italy’s composite PMI and services PMI, France’s composite PMI and services PMI, UK’s new passenger vehicle registrations, composite PMI and services PMI, Brazil’s foreign direct investment, composite PMI, services PMI and Central Bank of Brazil focus market readout, Canada’s composite PMI and services PMI, as well as US total vehicle sales.


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