AGE Daily Gold Update

AGE Daily Gold Update presents a recap on today's action in the precious metals markets. View archives.

5/3/2019: Gold gains on soft services data

Source: Bill Musgrave, American Gold Exchange

Austin — Gold gained 0.8% to close near $1,282 as soft US services data caused the dollar to fall despite a robust jobs report, boosting demand for alternative stores of value. The metal finished the week 0.6% lower.

US nonfarm payrolls expanded by 263,000 jobs in April, beating expectations and driving the unemployment rate down to 3.6%, the lowest since late 1969. Gains were centered in health care, construction, and white-collar positions. Retail hiring contracted, however, and wage growth remained unchanged.

Less rosy was news about the US services industry, which accounts for roughly 80% of GDP. The ISM nonmanufacturing index slowed more than forecast to its lowest reading in more than 18 months, with orders, inventory backlogs, employment, and prices all falling. The HIS Markit services PMI, a related gauge, dropped to its lowest level in more than two years.

The dollar, which initially rose after the solid jobs report, fell back into losses on the disappointing services data as traders speculated that ongoing weakness in that crucial sector could prompt the Fed to revisit the idea of a 2019 rate cut. The buck had rallied earlier in the week, pressuring gold, after Fed chief Jerome Powell gave no indication of an imminent rate cut after this month's Fed meeting.

Adding to pressure on the dollar and supporting gold, St Louis Fed President James Bullard said today that current Fed policy is "a little tight." Given that inflation has flagged in recent months, with the core PCE dropping to 1.6%, the central bank should try to "re-center" it to 2%, Bullard added. Looser monetary policy would weigh on the dollar by decreasing yield, boosting gold in turn by making it less expensive overseas.

Global demand for physical gold increased 7% during the first quarter of 2019 over the same period last year, according to research published this week by the World Gold Council. Central banks bought more than 145 tonnes to diversify currency reserves, the most in Q1 since 2013. Gold-backed ETF inflows rose by 49%.

The other precious metals were higher on the day and lower on the week. Silver jumped 1.9% but still lost 1.3% this week. Platinum picked up 1.1% but slid 4% this week. And palladium posted a weekly loss of 5.6% despite adding 1.7% today.

At the Comex close: June gold gained $9.60 to $1,281.60; July silver climbed 28 cents to $14.90; July platinum rose $20.60 to $863.50; and June palladium picked up $14.80 to $1,365.70 an ounce.