Gold Pushes Higher as Fed’s Message and Yen Swings Spur Gains

Sybilla Gross and Jack Ryan, Bloomberg News

, Bloomberg

(Bloomberg) -- Gold fell, with market watchers saying the previous day’s rally in response to Federal Reserve Chair Jerome Powell’s comments was overoptimistic.

Bullion dipped to about $2,300 an ounce after ending 1.5% higher in the prior session, the biggest one-day gain since mid-April. Treasury yields tumbled Wednesday — buoying bullion — as Powell struck a less hawkish tone than expected, saying policymakers need more evidence that price gains are cooling before reducing borrowing costs.

Data Thursday showed US labor costs jumped the most in a year as productivity gains slowed, adding to risks inflation will remain elevated.

“The fact remains that rate cuts are not expected anytime soon,” said Ole Hansen, commodities strategist at Saxo Bank A/S. As long as inflation keeps surprising on the upside, gold is likely to see “a prolonged and potentially deeper correction than the one we have seen already,” he said.

On global currency markets, the yen weakened against the dollar after speculation that Japanese authorities intervened for a second time this week to support it. A gauge of the greenback fell, making the precious metal cheaper for many buyers.

Traders are now eyeing the monthly employment report due Friday. Economists surveyed by Bloomberg forecast a 241,000 gain in nonfarm payrolls, which would be the slowest pace since November.

Gold has climbed about 11% this year, hitting an intraday record April 19, even as the timeline for Fed cuts has been pushed back. The rally during the past two months has been linked to strong central-bank purchases, demand from Asian markets — especially China — and conflicts in Ukraine and the Middle East.

In a sign that high prices may be dissuading some retail buyers, US Mint Inc. reported Wednesday that sales of its American Eagle gold coin fell to 15,500 ounces in April, down about a third from the previous month, and less than a 10th of the volume sold in April 2023.

Spot gold fell 0.6% to $2,304.80 an ounce as of 11:22 a.m. in New York. Silver and platinum were little changed while palladium fell. The Bloomberg Dollar Spot Index dipped 0.5%.

--With assistance from Yvonne Yue Li.