Gold update: Fed leaves interest rates unchanged and jobs figure is disappointing

Last week, the ECB decided not to further raise interest rates. This week, the FED also chose to keep interest rates unchanged, despite the recent gradual increase in inflation in the US. Since March 2022, the FED has raised interest rates by 5.25%.

The 10-year interest rate in the US dropped after the FED's decision. The interest rate decreased by 35 basis points (see the chart below) to 4.57%. The Dollar Index also fell from 106.8 on Wednesday to 1.049 last Friday.

Source: Investing.com

On Friday, the US released the employment report for October. The expectation was an increase of 180,000 jobs, but the actual figure came in at 150,000. Unemployment in October reached 3.9%, while the market had anticipated 3.8%. The labor market is the slowest indicator when it comes to economic development in a country. It appears that the US economy is now in motion as well.

Gold price rose by 7% in October

After March, October was the best month for gold this year. Gold increased by 7% last month, closing at $1992 per troy ounce on Friday. Silver, when measured in US dollars, gained 3.8% and closed at $23.20 per troy ounce.

Gold is approaching the record level of $2075 per troy ounce. The increase in euros has been significant in recent weeks, although some profits were taken this week. Silver is still far from its record of $48 reached in April 2011. The gold-silver ratio closed this week at 1/85.

Central bank gold purchases

The latest figures for central bank gold purchases in 2023 are impressive. Central banks bought a record amount of gold in 2022, adding a total of 1136 tons of gold to their reserves worldwide.

This year seems to be even better. In the first three quarters of 2022, central banks had already purchased 750 tons of gold. In the first three quarters of this year, central banks have bought 800 tons of gold.

Here is an overview of central bank gold purchases since 2010:

Source: Metals Focus, Refinitiv GFMS, World Gold Council

For the year 2023, only the purchases up to the third quarter are included. Gold purchases in the third quarter were the fourth-largest ever recorded. The fourth quarter started strong in October, and we are closely monitoring the data for November and December.

Agenda

On Monday, the final figure for the Purchasing Managers Index (PMI) of the service sector in the eurozone will be announced. The service sector has recently been declining. The manufacturing index has been shrinking for months. On Tuesday, the final inflation figure for October in the Netherlands will be published.