Gold rally finally takes a breather

By Glenn Dyer | More Articles by Glenn Dyer

Gold fell for the first session in eight, copper nudged higher, oil rose and iron ore fell, again in what you would describe as a 'cliche' trading session – a bit of this, a bit of that and ignoring the continuing sell off in equities.

The driver is the tizz investors, analysts and alike have generated about whether US interest rates will fall, by how much and when – 2024 is still the underlying target but if the US jobs data tonight is well above 200,000 then a cut might be later.

If they are a lot lower than 200,000 then it will be back to 'Rate Cut Looms’.

Iron ore, the most important commodity for Australia, ended at $US98 a tonne on the SGX platform in Singapore, trading in a tight range without any strength.

China revealed new rules for buying electrified vehicles in an effort to keep sales rising, a development that should be a concern to investors in renewables. China’s sales of new energy vehicles in the March quarter were down 30% from the 1.08 million record in the December quarter.

Gold closed lower on Thursday for the first time in eight sessions following a record run that pushed prices above $US2,300 for the first time,

Gold for June delivery closed down $US6.50 to settle at $US2,308.50 per ounce while the front month ended at $US2,283 an ounce, down nearly $US11 an ounce. the Australian price settled back to around $A3,477 an ounce, thanks to the fall and the higher Aussie dollar.

Comex copper for May rose 0.50% to end at just over $US4.21 a pound- more in hope than anything else as the shortage of concentrates continues to underwrite the strength, not demand.

Wall Street sold off for a 4th session with the losing run the worst for six months.

Oil though rose with US crude up to $US86.74 in early Asian dealings on Friday and Brent topping $US90 a barrel for the first time in more than six months.

Wednesday's speech and question and answer session by Fed boss, Jay Powell at Stanford University in California should have been reassuring as he repeated previous comments that the central bank will need to be assured inflation is tracking down to its 2% target as data continues to show the US economy remains hot.

"We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent. Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy," Powell said.

That was no different to what he has been saying but markets are eying the data and coming to the conclusion that it is warmer than wanted by the Fed – and the surge in oil prices is adding to those concerns ahead of the summer driving season and rising petrol prices.

While the Fed is expected to cut rates three times this year by a total 75 basis points, increasingly contradictory statements by its officials have clouded the outlook.

After Powell’s not unexpected comments, another Fed member, Raphael Bostic took an altogether much more hawkish line by offering his view that there might only be one 25-basis point cut this year and not until the fourth quarter.

Treasury yields rose, then fell – in a repeat of their direction on Wednesday.

The US two-year bond yield opened at 4.6812%, then rose to just over 4.70% and then scuttled all the way down to close at 4.65%.The yield on the 10-year Treasury bond was up to 4.38% but ended up at just under 4.31% and lower over the session.

The US dollar was weaker later in the session and the Aussie dollar ended around 65.85 US cents for a small gain over the day.

The trading reflected the lack of certainty in any of the stories around the markets – high for longer, or a cut and then no change for a long time. In fact the only common theme is that the three cut story is in danger of not happening simply because the US economy is too healthy at the moment.

Ahead of Friday’s jobs report and then next week’s consumer price inflation report for March, no one is really going out on a limb. That could be damaging for your financial health. 

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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