The ‘ghost’ of the Fed cut off gold’s supply

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The jitters caused by extremely strong US labor market data also derailed gold, which ended its third straight week of gains but pared gains after today’s decline.

In particular, the gold contract for December delivery ended trading at $1,791.20 an ounce, down $15.50, or 0.9%. For the week, however, the precious metal gained 0.5%, according to Dow Jones Market Data

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In the same climate, the silver U.S. crude for September delivery fell 28 cents, or 1.4%, to settle at $19.842 an ounce, after losing 1.8% on the week.

As for the rest of the metals, the palladium for September delivery strengthened by 51 dollars or 2.5%, to close at 2,128.50 dollars an ounce, while platinum October gained $1.50, or 0.2%, to $924.70 an ounce, ending the week up 3.9%.

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The September delivery contract for copper It rose 7 cents, or nearly 1.9%, to $3.552, down 0.6% for the week.

In the news of the day, the US labor market broke all counters as it added more 528,000 seats of work in July, when analysts’ estimates spoke of barely 250,000.

Which effectively commits the Fed to further aggressive interest rate hikes to fight rampant inflation.

“The recent rally in gold has been based on the assumption that the Fed will move to a more dovish stance. But the jobs data shows that the US economy is strong and that may lead the Fed to do more aggressive moves, which is not is good news for gold,” notes Bart Melek, commodities analyst at TD Securities.

It is recalled that interest rates work in competition with the precious metal, which does not offer a fixed return on investment.

Significantly, bets on the Fed’s next rate hike in September, which were 65% to 35% yesterday for a 50 basis point hike, have now completely reversed, with the market pricing in a 75 basis point hike at 68.5% base and only 31.5% of the 50 m.v.

So the precious metal landed sharply today, after the upward course it had followed for almost the whole of the week so far, having also benefited from the Sino-American tensions against the background of Taiwan, which underlined its character as a safe investment haven.

According to Melek, “if there is a resurgence of geopolitical tensions this will help gold, but it cannot lead to a sustained rally”. According to him, “the next catalyst for gold prices will be a US inflation measurement next week.”

Source: Capital

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