Gold prices edged lower on Monday, slipping 0.2% to $4,165.21 per ounce, as the metal hovered near its highest level in two weeks. The slight retreat came as a stronger U.S. dollar weighed on bullion, though prices remained supported by soft U.S. jobs data that tempered expectations for further interest rate hikes.
Market Context and Fed Rate Hike Odds
The pullback from the recent high follows a period of recovery after gold dropped below $4,000 in June. Traders are now closely watching the Federal Reserve's next moves, with odds of a September rate hike steady at 56% following the June payrolls report, which showed an increase of 57,000 jobs. The data, released by the U.S. Bureau of Labor Statistics, also included downward revisions of 74,000 jobs for April and May, while the labor force participation rate slipped to 61.5% and average hourly earnings rose 3.5% year-over-year.
This mixed employment picture has kept rate hike expectations in check, but inflation concerns remain on the table. Investors are now awaiting the minutes from the Fed's June 16-17 meeting, due July 8, for any hints of a shift in the central bank's hawkish stance.
JPMorgan's Precious Metals Targets
JPMorgan Chase & Co. has set a third-quarter gold target of $4,300 per ounce, implying about 3.2% upside from current levels, with a fourth-quarter target of $4,500 (8% upside). The bank's cautious outlook reflects weaker demand from major sectors, a notable shift from its earlier call for gold to hit $6,000 by year-end.
Among other precious metals, platinum appears to have the most catch-up potential. JPMorgan's year-end target for platinum stands at $1,800 per ounce, implying 9.1% upside from its Monday spot price of $1,649.61. Silver, trading at $62.28 per ounce, is now within the bank's $60-$65 average range, suggesting it is no longer the undervalued outlier. Palladium, at $1,288.14 per ounce, has a 4.8% upside to JPMorgan's $1,350 year-end target.
Central Bank Buying and Physical Demand
Physical demand for gold provided a supportive backdrop. Central banks added a net 41 tonnes of gold to their reserves in May, led by Poland (18 tonnes) and China (10 tonnes), according to the World Gold Council. Marissa Salim, senior research lead for APAC at the World Gold Council, noted that central banks "were back in buying mode in May," helping to balance the market.
Analyst Commentary and Market Outlook
Tim Waterer, chief market analyst at KCM Trade, said gold is still seeing pressure from a strong U.S. dollar, and traders will be watching the Fed minutes for any signs that more officials agree with Chair Kevin Warsh's hawkish stance. The gold-silver ratio stood near 66.9 on Monday, indicating that silver has closed the gap with JPMorgan's projection range.
For investors in SPDR Gold Shares (NYSEARCA:GLD) and iShares Silver Trust (NYSEARCA:SLV), the key takeaway is that gold has largely recovered its recent losses and now awaits either easier rate talk or a pickup in real-world buying. Platinum's price remains further from big-bank targets, suggesting it may offer the most upside potential among the precious metals.
The next major catalyst will be the release of the Fed minutes on July 8, followed by the FOMC meeting on July 28-29. These events will likely determine whether gold can break above JPMorgan's Q3 target or if it will remain range-bound.
