Resilience in Gold despite ETF Reductions

For the week ended, on February2, 2024, IBJA reported, in response to key US economic indicators and anticipation surrounding the upcoming jobs report, gold prices experienced notable fluctuations in the market. Traders closely examined data on labor and manufacturing, with a particular focus on the potential impact on the Federal Reserve‘s stance on monetary easing.

US unemployment data revealed a concerning trend, as both initial and recurring applications surged to a two-month high, signaling a possible slowdown in the labor market. Conversely, a measure of US factory activity reached a 15-month high at the beginning of the year, driven by robust order growth since May 2022, suggesting signs of stabilization in the manufacturing sector.

The unexpected miss in the jobs data led market participants to reassess their views, looking past recent hawkish comments from Federal Reserve Chair Jerome Powell. Powell stated on Wednesday that a rate cut in March is unlikely, prompting traders to adjust their expectations for the timing of the easing cycle. Swap markets now indicate less than a 40% chance of a rate reduction in March, a significant drop from the over 80% probability at the start of the year.

Exchange-traded funds (ETFs) played a pivotal role in the gold market, with a noteworthy reduction of 43,387 troy ounces in the last trading session. This marked the 10th consecutive day of declines, the longest losing streak since September 21. The total net sales for the year reached 1.63 million ounces, amounting to $88.5 million at yesterday’s spot price. ETFs collectively reduced their gold holdings by 1.9%, reaching the lowest level since January 27, 2020, at 84 million ounces.

Despite these trends, the price of gold showed resilience, registering a modest 0.1% increase in the latest session. Year-to-date, gold declined by 1.1%, settling at $2,039.52 per ounce. Notably, State Street’s SPDR Gold Shares, the largest precious-metals ETF, trimmed its holdings by 55,580 ounces in the last session, reflecting a total of 27.4 million ounces with a market value of $55.8 billion.

In a parallel move, ETFs also reduced their silver holdings by 2.25 million troy ounces in the last trading session. This marked the fifth consecutive day of declines, constituting the most significant one-day decrease since November 29 and the longest losing streak since December 26. Despite recent setbacks, net purchases for the year stand at 2.39 million ounces, underscoring the ongoing complexity and volatility within precious metals markets.

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