Gold update: gold prices are lower for nine days in a row

Rising interest rates and a stronger US dollar have had a negative impact on gold price developments over the past 2 weeks. The 10-year yield in the US rose to the highest level in 16 years. Gold has 2 major opponents: higher interest rates and a stronger dollar.

US 10-year yields have risen 41% in the last 6 months. A very sharp increase in a short time. The 10-year interest rate also rose sharply in the eurozone. The Dutch 10-year interest rate rose by 28% in 6 months. The Italian 10-year rose by 22% despite ECB support. Italy now pays almost 5% on new money to be borrowed.

Below is the graph of the 10-year interest rate in the US in the last 6 months:

Bron: Investing.com

At the same time, the Dollar Index is at a 6-month high. Gold is holding up well despite these circumstances. The gold price has risen slightly in US dollars over the same period. Exactly 6 months ago, gold was trading at $1813 per troy ounce. This week the gold price closed at $1832.

The pressure has increased since the end of September. The gold price has fallen 9 days in a row in the last 2 weeks. In percentage terms this amounts to -4.8%. In euros the decrease is 4.3%. At Doijer & Kalff we saw a significant increase in the number of orders in the last week, with customers mainly purchasing gold.

US jobs figure much better than expected

Investors have been looking forward this week to the US jobs figure that was announced last Friday. The expectation was an increase of 170,000 additional jobs in September. The actual figure was much better at 336,000 additional jobs. Unemployment in the US stood at 3.8%.

The figure seems “too good to be true”. Looking at the decline in full-time jobs in the US over the last 3 months, 692,000 jobs have been lost. This level has been reached 3 times in the past: in 2001, 2008 and in 2020. The number of part-time jobs increased by 1.200.000 jobs in the last 3 months. This probably explains the positively surprising figure.

The September inflation rate will be announced in the US next week. In June, US inflation fell to 2.9%, reaching its lowest point since March 2021. But inflation rose again in July to reach 3.2%. In August, inflation reached 3.6%.

If inflation in the US is much higher in September, the chance of an interest rate increase in November will also increase again. On the other hand, interest rates are becoming increasingly painful from an economic perspective. The purchasing managers’ index for the US services sector fell to 53.6 in September from 54.5 in August. That still means growth, but growth is decreasing. A figure above 50 indicates growth and below 50 indicates shrinkage. The purchasing managers index for industry came to 49.

In the eurozone, the final figure of the composite purchasing managers index, i.e. the combination of industry and services, was 47.2 in September versus 46.7 in August. Industry showed a decline while the services sector recovered somewhat.

Gold is trading at a gain of 1.6% this year in euros. Silver is down 8.8% this year.

Agenda

The September inflation figure will be announced in the Netherlands on Tuesday. Germany will follow on Wednesday with the final inflation figure for September. The Fed minutes will also be released on Wednesday (we will gain insight into the background surrounding the Fed’s latest interest rate decision). The September inflation rate in the US will follow on Thursday.