The price of gold is poised for a modest weekly decline, following the release of a mixed US jobs report that has not significantly influenced the Federal Reserve’s stance on interest rates. As of Friday, the price of gold fell to approximately $4,037 an ounce, registering a decrease of about 0.5% for the week. This development comes ahead of the Fed’s upcoming meeting on December 9 and 10, where board members will examine the labor market report, highlighting job growth that surpassed expectations in September, but also reflecting an uptick in the unemployment rate.
Analysts from TD Securities, including Oscar Munoz, commented that the jobs report presented data that could appeal to both advocates of aggressive monetary policy and those favoring a more expansionist approach. The minutes from the October Open Market Committee meeting, released earlier this week, revealed that many Fed policymakers favor maintaining current interest rates, suggesting a cautious approach in the near future. As a result, futures contracts indicate only a 40% probability of a rate cut next month, a stark contrast to two weeks prior when market expectations anticipated a quarter-point reduction.
In a high-interest-rate environment, gold often faces downward pressure, which helps explain its recent decline from the record highs reached in October. Despite this week’s drop, gold prices have surged by approximately 55% since the start of the year, positioning it for its strongest annual gain since 1979. This substantial increase has been fueled by significant inflows into exchange-traded funds and robust central bank purchases.
However, the recent surge in gold is deemed somewhat overblown, driven by what some experts refer to as “the trade of abandoning sovereign currencies and bonds,” propelled by financial anxieties across G7 nations. Carsten Menke, head of Next Generation Research at Julius Baer, noted that this abandonment trade is largely driven by optimism rather than hard realities, suggesting that while it may act as a long-term driver for gold, price corrections are overdue.
As of 9:31 AM Singapore time, gold prices dipped by 0.3% to $4,037.44 an ounce. The Bloomberg Dollar Strength Index held steady during this period, while silver prices saw a decline, and both palladium and platinum experienced slight increases.
