- Gold surged by nearly 1% to a one-week peak.
- US Treasury yields decreased as data indicated a slowdown in the labor market.
- US worker productivity declined in the first quarter.
On Thursday, gold surged by nearly 1% to reach a one-week peak due to a decline in the dollar’s value amid reduced rate hike expectations. The rise in gold also occurred after the US House of Representatives approved a bill to lift the federal debt limit.
Despite opposition from hardline members of both political parties, the House of Representatives passed the bill that suspends the $31.4 trillion debt ceiling and prevents a disastrous government default. The US Senate will now consider the bill.
Additionally, US Treasury yields decreased as data indicated a slowdown in the labor market, reducing the likelihood of the Federal Reserve implementing an interest rate hike. According to CME Group’s FedWatch Tool, futures trading indicates a 76.2% likelihood that the Fed will abstain from raising rates at its June 13-14 policy meeting.
The yield on benchmark US 10-year Treasury notes dropped to 3.607%, while the yield on the 30-year Treasury bond decreased to 3.826%. Investors adjusted their expectations for a rate hike, leading to a decline in the US dollar from its two-month high. This made gold cheaper for foreign buyers, increasing demand.
Labor Department data showed a decline in US worker productivity during the first quarter, suggesting a more relaxed labor market and decreasing the rate hike probability.
US worker productivity declined in the first quarter, although not as significant as initially estimated. The data also revealed significant downward revisions to labor costs in the previous quarter and the final three months of 2022.
Meanwhile, the number of new claims for unemployment benefits filed by Americans increased slightly last week. Still, private payrolls exceeded expectations in May, indicating a tight labor market that could influence the Federal Reserve to maintain higher interest rates.
Attention now turns to the Labor Department’s eagerly awaited unemployment report for May, scheduled for release on Friday. This data will majorly determine whether the Fed will continue with its aggressive rate hikes.
On Wednesday, gold strengthened as lower Treasury yields provided support. Still, the dollar’s strength, the anticipation of more interest rate hikes, and positive expectations regarding a US debt agreement maintained the trajectory of bullion towards its first monthly decline in three months.