- Gold is on course for a second consecutive monthly gain.
- The rise in US annual inflation in October was the smallest since early 2021.
- Initial claims for state unemployment benefits rose by 7,000 last week.
On Thursday, gold slipped but stayed on course for a second consecutive monthly gain due to expectations that the Federal Reserve might soon cut interest rates. This would make non-yielding bullion more attractive. Moreover, the rise of the dollar for the day contributed to the drop in gold prices. However, the dollar was on track for its worst month in a year, and 10-year Treasury yields hit a two-and-a-half-month low.
Addressing gold’s performance, New York-based independent metals trader Tai Wong stated that while gold might be a bit exhausted, any price pullback should be limited to $2,015-$2,020. Additionally, concerns would only arise if the price falls below $2,000.
Meanwhile, Daniel Ghali, a commodity strategist at TD Securities, anticipates gold prices breaking into new highs in the first half of 2024 as the Fed pivots and the economy slows.
US PCE price index (Source: Bureau of Economic Analysis)
Traders assessed data indicating that US consumer spending moderately increased in October, while the annual inflation rise was the smallest since early 2021. Inflation measured by the PCE price index remained unchanged in October after a 0.4% rise in September. Food prices increased by 0.2%, and energy product costs fell by 2.6%.
Over the 12 months through October, the PCE price index saw a 3.0% increase, marking the smallest year-on-year gain since March 2021, following a 3.4% advance in September. Other Thursday data indicated a gradual easing of the labor market, with more Americans applying for unemployment benefits. The number of jobless rolls surged to a two-year high in mid-November.
Initial claims for state unemployment benefits rose by 7,000 to 218,000 for the week ending Nov. 25. The labor market is cooling concurrently with the overall demand in the economy. According to the Fed’s Beige Book report on Wednesday, the demand for labor has “continued to ease” in the weeks leading up to mid-November, with most districts reporting “flat to modest increases in overall employment.”
J.P. Morgan’s 2024 commodities outlook highlighted gold and silver as the only commodities with a structural bullish outlook. Consequently, gold rose on Wednesday to near its highest point in about seven months.