Gold market report: “Trend-setting US data”

Blumenroth reports this week on how September is often difficult for equity investors, as evidenced by historical events and current market developments, with a focus on recent US labor market data and expectations of Fed rate cuts.
 

6. September 2024. FRANKFURT (Xetra-Gold).New month, new luck. September has a rather difficult reputation, at least among equity investors. I remember September 11, 2001 or the Lehman shock in September 2008 with a slight shudder. This Tuesday, too, many US traders must have been spooked after the Nasdaq Composite, for example, fell by more than three percent.

US data on job vacancies disappoint

However, the real interest of the financial markets this week is likely to be the US labor market data. These will be published on Friday. The data on job vacancies in the US in July already provided a small foretaste yesterday. These fell much more sharply than expected to around 7.67 million, the lowest level since January 2021. The ratio of job vacancies to registered unemployed fell to 1.07 - the lowest level since 2018.

Fed: the signals are pointing to a rate cut

In an immediate reaction on the interest rate futures markets, a robust initial interest rate cut of 0.5 percentage points was priced in with a 50% probability for the Fed's meeting on 18 September. This in turn led to a noticeable drop in yields, particularly on short-dated US government bonds. Apart from the market turbulence on August 5, two-year bonds yielded less than their ten-year counterparts for the first time since 2022. The US dollar depreciated moderately. Both of these factors tend to support the price of the most precious of metals.

The labor market data for August on Friday should now be decisive for market expectations of the Fed's interest rate turnaround: If, as expected by the market consensus, more than 150 thousand new jobs were created and the unemployment rate had fallen slightly from 4.3%, the scales are likely to tilt more towards a 0.25% rate cut again - which could disappoint supporters of the yellow metal somewhat.

Weak commodity prices

However, other factors could also determine the price of gold at the moment. Weak industrial data from China and the US, for example, sent oil and copper prices plummeting this week. Oil is now trading at its lowest level since the end of 2023. In this environment of weak commodity prices, gold has held up like the proverbial rock in the surf, but is also trading somewhat weaker than in the previous week.

Gold trades around the US$ 2,500 per ounce mark

On Thursday morning last week, gold traded at US$ 2,519 per ounce. On the same day, it sniffed a little more upward air and climbed to 2,528. As the US was facing a long weekend due to the public holiday on Monday this week, positions were apparently smoothed out on Friday. Gold fell to 2,502 at the end of the week. In the new week, the most precious of metals mostly traded around 2,495/2,500. Possibly for similar reasons as at the beginning of August - profit-taking through gold sales to cover losses on other positions - it fell to 2,472 yesterday morning, but quickly regained ground and rose back to 2,495. Gold will start European trading this morning at around US$ 2,500 per ounce at around 8 a.m..

The Xetra-Gold price also fell slightly compared to the previous week, although the moderate depreciation of the euro against the US dollar slowed the fall somewhat. During normal trading hours, it initially rose from €72.70 per gram on Thursday morning last week to €73.70 on the same afternoon. However, it then fell back to 71.95 yesterday morning. This morning, however, Xetra-Gold is likely to start the European trading day slightly higher again at around €72.60 per gram.

Data on the US labor market report on Friday is likely to move prices on the financial markets significantly. The ECB will meet next week and will most likely cut interest rates again. The Fed will follow on September 18. We will then meet again in two weeks' time on September 19.  

From Michael Blumenroth, 6. September 2024, © Deutsche Börse