Gold Jumps Near Record, Stocks Sink as Fed Rate-Cut Bets Leap on Bad US Jobs Data
Friday, 8/02/2024 15:15
GOLD leapt in London trade Friday, fixing at the 2nd highest benchmark price ever around $2470 per Troy ounce as the plunge in global stock markets accelerated along with betting on sharp cuts to US interest rates after new data said unemployment is rising fast in the world's largest economy.
Gold prices then retreated sharply as the sell-off in US equities pulled the MSCI World Index of developed-economy stocks down 2.5% for the day to a 2-month low, dropping $30 per ounce to $2440.
Bond prices jumped, crushing longer-term borrowing costs to new 2024 lows, while crude oil prices sank to 2-month lows.
Physical gold bullion prices had earlier spiked by $20 per Troy ounce to touch $2477 on the weak US jobs numbers, before erasing that gain only to rebound again before dropping to cut the week's gain in US Comex futures contracts to 2.2%, while
the price of silver lost 30 cents from its US jobs-data spike to trade back below $29.
"Why not cut rates today?" Federal Reserve chairman Jerome Powell was asked on Wednesday after leaving the cost of borrowing Dollars yet again at the highest in 2 decades above 5.30% per annum.
"We're getting closer to that point," the Fed chair replied in his
post-meeting press conference, saying that a September rate cut "could be on the table" if the balance of risks continued to shift from a possible rebound of inflation to a slowdown in the labor market.
But rather than predicting a standard 1/4-point cut from the Fed at next month's meeting,
betting on September's Fed decision today leapt to put the chances of a half-point cut at more than 70% after the Bureau of Labor Statistics said the US jobless rate rose to 4.3% last month – the worst since October 2021.
Having shrugged off expectations that the Fed would keep interest rates on cash in the bank 'higher for longer' throughout 2024, the price of gold and silver today spiked as positions in December futures contracts on the CME derivatives exchange swung to predict a full one percentage point cut by Christmas.
New York's stock market fell sharply meantime, extending this week's plunge in the megatech 'Magnificent 7' led by AI darling Nvidia (Nasdaq: NVDA) as fellow chipmaker Intel (Nasdaq: INTC)
opened the day more than 25% lower after announcing 15,000 job losses – and suspending its dividend payment to shareholders – as part of a $10 billion cost-cutting drive.
Japan's Topix share index had already sunk 6.1% overnight, ending the week at a sudden 6-month low and dropping more than 13% from mid-July's new all-time high as the Yen continued to soar on the currency market following the Bank of Japan raising interest rates from zero.
US President Joe Biden meantime said he is
redeploying military forces in the Middle East ready to help defend Israel against any
retaliation by Iran for this week's assassination of Gaza's Hamas leader and a senior Hezbollah commander in Lebanon.
Israel's National Security Council today advised its citizens against travel to 40 'high-risk' countries and
urged extra caution "in all other destinations".
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The European Union on Friday
rejected a complaint from member states Hungary and Slovakia over non-member Ukraine blocking supplies of crude oil from its invader Russia.
Moscow last night completed a prisoner swap with Washington which saw
16 US and other Western 'hostages' exchanged for 10 Russian nationals at Ankara Airport in a deal brokered by Nato member Turkey.
Back in the US, "Higher interest rates are
hurting activity without the intended outcome of further lowering prices," says a note from banking giant Wells Fargo, warning of economic stagflation after yesterday's ISM PMI report showed manufacturing activity shrinking for the 4th month running in July while prices paid by supply-chain managers beat analyst forecasts.
Overall last month, non-farm payrolls expanded by only 114,000 on
the BLS' first estimate, the weakest July growth since 2019 and missing analysts' NFP consensus forecasts by 1/3rd.
Average wage growth also slowed harder than analysts expected, dropped to the weakest since May 2021 at 3.6% per year.
Gold futures prices for December spiked to a new record of $2522 on Friday's BLS jobs report before retreating $30 per Troy ounce.
Physical bullion settled in London rose 3.5% from last Friday, its strongest weekly gain since mid-April's surge, with the 3pm benchmark auction finding a price barely $10 per ounce below 17 July's all-time record of $2480.
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