Gold prices are $2,495 an ounce this Tuesday morning, down from $2,525 an ounce last Monday. After the extended Labor Day weekend, this will be an action-packed four-day week of potential market-moving news.
On Friday, the Core Personal Consumption Expenditure Index reporting met the median forecasts at .2% month-over-month and 2.6% year-over-year. The Core PCE Index measures the prices paid for domestic purchases of goods and services, excluding food and energy prices. The status quo on this significant month-over-month inflation number should solidify an interest rate cut later this month.
The market expects the Federal Reserve to cut interest rates by at least 25 basis points on September 18th when the Fed members meet again. As Jerome Powell said earlier this month, "the time has come for policy to adjust" regarding interest rate decreases.
Jerome Powell also stated, "We do not seek or welcome further cooling in labor market conditions" and noted that the "downside risks to employment have increased." There is speculation that employment reports in the next two weeks showing further damage to the employment rate would increase the Federal Reserve's speed of change, increasing the September 18th interest rate cut by as much as 50 basis points.
The Bureau of Labor Statistics updated the nonfarm payroll numbers from April 2023 to March 2024, revealing that 818,000 of the reported jobs never happened. This 30 percent downward revision in jobs created over the past year is a wake-up call to the damaging effect of high interest rates on employment.
Potential Market-Moving Events
Tuesday - This morning's (ISM) manufacturing data showed a slightly weaker expansion than projected.
Wednesday - Job Openings
Thursday - ADP Employment
Friday - U.S. Employment Report, U.S. Employment Rate
The employment reporting this week will likely determine the pace of the interest rate cut for The Federal Reserve. The interest rate cut affects the value of the U.S. Dollar, and the value of the dollar traditionally has an inverse relationship with the price of gold.
This morning, the Japanese Yen value was one percent higher. Only a month ago, the Yen spiked to its highest value against the U.S. Dollar in eight months, and over a couple of days, the NASDAQ took a 10% dive while gold held above $2,400 an ounce. The "Yen Carry Trade" will be something to watch if the Bank of Japan continues to increase interest rates, especially while the U.S. Federal Reserve moves to lower interest rates.
In global gold news, central bank gold purchases doubled in July and were the largest since January 2024.
Precious metals like gold have historically held their value during stock market crashes. When equities suffer, gold and silver often see increased demand as investors seek stable and tangible assets.
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byUnited States Gold Bureau