By Jigar Trivedi
Comex Gold rose to around $1,980 an ounce on Friday and on track to post its first weekly advance in four, as the US Federal Reserve signaled that it could pause its interest rate hikes this month. Fed Governor Philip Jefferson and Philadelphia Fed President Patrick Harker suggested this week the US central bank could skip a rate hike in the next meeting, but qualified that any decision to hold rates steady should not be viewed as the end of the tightening cycle. Mixed US economic data supported such an outlook. The US Senate has voted to approve a bipartisan deal that would increase the federal debt ceiling, allaying fears of a historic default.
Senate approves deal raising debt ceiling, averting U.S. default
The Senate passed wide-ranging legislation that suspends the $31.4 trillion debt ceiling while cutting federal spending, backing a bipartisan deal struck by President Biden and House Speaker Kevin McCarthy to avert an unprecedented U.S. default. The 63-36 vote reflected support from both Democrats and Republicans, with backers saying the need to raise the nation’s borrowing limit outweighed concern about provisions related to military and domestic spending and energy policy, among other contentious issues.
US Dollar ends week lower
The dollar index steadied around 103.5 on Friday but was still headed for its first weekly drop in four as comments from some Federal Reserve officials raised bets the central bank will pause its tightening cycle in June. ISM data showed US manufacturing activity contracted for the 5th straight month, though jobs figures continued to point to a strong labor market. Investors now look ahead to the May jobs report for further clues on the economy and monetary policy. Elsewhere, the House of Representatives approved the Fiscal Responsibility Act of 2023 on Wednesday evening. The bill is now headed to the Senate and is expected to be approved before the June 5 default deadline.
Private payrolls rose by 278,000 in May, well ahead of expectations
The U.S. labor market posted another month of surprising strength in May as companies added jobs at a pace well above expectations, according to a report Thursday from payroll processing firm ADP. Private sector employment increased by a seasonally adjusted 278,000 for the month, ahead of the Dow Jones estimate for 180,000 and a bit lower than the downwardly revised 291,000 in April. May’s increase took the payroll growth so far in 2023 to 1.09 million.
Swiss gold exports fall to 10-month low amid sky-high prices
Swiss gold exports fell to their lowest in ten months in April as shipments to India, China and Turkey shrank, Swiss customs data showed. The decline coincided with a period of very high bullion prices, which tend to suppress consumer demand, particularly in Asia.
Turkey has also imposed some restrictions on gold imports after a devastating earthquake in February. Switzerland is the world’s biggest bullion refining and transit hub. China and India are the largest consumer markets for gold and Turkey has been a major importer in recent months as inflation runs rampant.
Comex Gold price averaged $2,001 an ounce in April, prices have since fallen back to around $1,960. Swiss gold exports to mainland China and India in April were the lowest since January, shipments to Hong Kong were the lowest since November and exports to Turkey were the lowest since April last year, the customs data showed.
Outlook for gold
From the point of view of the economic data, US will release factory orders and ISM non-manufacturing PMI on Monday and weekly initial jobless claims on Thursday. India will hold its monetary policy on 8th June. From the technical point of view, MCX gold August futures have a major hurdle around Rs 61,200 per 10 gram. We recommend going long on every dip in gold. The view will negative below Rs. 59,400 per 10 gram.
(Jigar Trivedi, Senior Research Analyst – Currencies & Commodities, Reliance Securities. Views expressed are author’s own. Please consult your financial advisor before investing.)
