Gold Prices Slide Amid Dollar Strength and Rate Cut Concerns
Gold prices experienced a slight decline on Thursday, pressured by a strengthening US dollar and diminishing expectations for an immediate Federal Reserve rate cut. Investors remained cautious while awaiting the crucial US non-farm payrolls report scheduled for release later in the day.
Spot gold traded 0.1% lower at $4,077.13 per ounce as of 0305 GMT, while US gold futures for December delivery fell 0.2% to $4,075.80 per ounce. The precious metal struggled to break above the $4,100 resistance level amid changing market sentiment.
Market Analysts Weigh In on Gold's Performance
OANDA senior market analyst Kelvin Wong attributed the decline to significant paring back of rate-cut expectations over the past two weeks. "Gold right now is down primarily due to the fact that the rate-cut bets have been pared back quite remarkably in the last two weeks," Wong stated.
He further elaborated on the technical outlook: "In the short-term perspective, this causes gold price to remain lackluster below $4,100 level. I see a resistance at $4,155, then gold could potentially trade below close to the $4,000-$3,980 level."
Dollar Strength and Fed Policy Impact
The dollar index climbed to a more than two-week high against competing currencies, making gold more expensive for holders of other currencies. This development came alongside shifting expectations regarding Federal Reserve policy.
According to CME Group's FedWatch tool, traders now see only a 33% chance for a rate cut at the Fed's December 9-10 meeting, down significantly from 49% on Wednesday. The minutes from the Fed's October meeting revealed that policymakers proceeded with rate cuts despite concerns about entrenched inflation and potential loss of public trust in the central bank.
Non-yielding gold typically performs better in low-interest-rate environments and during periods of economic uncertainty, making current market conditions challenging for the precious metal.
All Eyes on Jobs Data and Market Implications
Market attention has shifted to the delayed September US non-farm payrolls report, which is expected to provide crucial insights into the Fed's future policy direction. The report was postponed due to the recent US government shutdown.
Reuters-polled economists anticipate the data will show that employers added 50,000 jobs during September. This information will be critical for assessing the health of the US labor market and its potential influence on monetary policy decisions.
Meanwhile, investment interest in gold showed some resilience as SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported its holdings increased by 0.22% to 1,043.72 tonnes on Wednesday from 1,041.43 tonnes on Tuesday.
Other Precious Metals Show Mixed Performance
While gold faced downward pressure, other precious metals demonstrated varied performance. Spot silver managed a 0.2% gain to reach $51.44 per ounce, while platinum climbed 0.9% to $1,559.54. Palladium outperformed with a 1.1% increase to $1,395.37, indicating selective investor interest across the precious metals spectrum.
The mixed performance across precious metals highlights the complex interplay between dollar strength, interest rate expectations, and individual metal fundamentals that continues to shape market dynamics.
