Gold prices experienced a significant decline on Wednesday, dropping over 1% as market participants opted to secure profits following a recent strong rally. The precious metal, however, managed to recover some of its earlier steep losses after the release of weaker-than-anticipated United States employment figures, which reinforced market speculation about potential interest rate reductions by the Federal Reserve later this year.
Market Movement and Key Price Levels
Spot gold was down 0.9% at $4,445.32 per ounce as of 1:36 p.m. Eastern Time (1836 GMT). During the trading session, prices had plunged by as much as 1.7%, hitting a low of $4,422.89. In the futures market, the most active U.S. gold contract for February delivery settled 0.7% lower at $4,462.50 per ounce.
David Meger, the director of metals trading at High Ridge Futures, characterized the day's price action. "We're viewing today's pullback as general profit taking after that recent surge," he stated. He further added that despite the sell-off, the softer employment data continues to build the argument for the Fed to ease monetary policy, a factor that has been supporting gold prices in the recent past.
Economic Data Driving Fed Expectations
The key driver moderating gold's fall was a batch of disappointing U.S. labour market reports. Data revealed that job openings in the United States declined more than economists had forecast for the month of November. This followed only a marginal increase in October. A separate report from ADP showed that private sector payroll growth in December also fell short of market expectations.
This economic information has directly influenced interest rate projections. According to data compiled by LSEG, financial markets are now pricing in approximately 61 basis points worth of interest rate cuts from the Federal Reserve during 2024. The focus for traders now shifts to the more comprehensive U.S. nonfarm payrolls report scheduled for release on Friday, which will provide further clarity on the health of the job market.
Geopolitical and Fundamental Support for Gold
Beyond interest rate dynamics, other factors continue to provide a foundational support level for gold prices. Geopolitical tensions persisted, notably surrounding Venezuela after President Nicolas Maduro's capture over the weekend. In related developments, U.S. President Donald Trump announced plans to refine and sell Venezuelan crude oil, while the White House separately confirmed discussions about a potential acquisition of Greenland, which could include military dimensions.
On the fundamental demand side, official data confirmed that China's central bank extended its gold-buying spree for a 14th consecutive month in December. Commenting on this trend, David Meger noted that the data from China "continues to show strong demand that we're seeing from Asia ... and again, one more reason why we've seen this recent push to the upside." As a traditional safe-haven asset that does not yield interest, gold tends to attract investment in environments characterized by low interest rates and elevated uncertainty.
Other Precious Metals See Steeper Declines
The sell-off in the precious metals complex was not limited to gold. Other metals faced even sharper corrections. Spot silver plummeted 4.1% to $77.93 per ounce. Analysts have mixed views on silver's outlook; HSBC raised its price forecast for 2026 to $68.25 but cautioned about increased volatility as supply conditions ease. Goldman Sachs pointed to thin inventories in London as a factor that could drive sharp price swings and short-term rallies, which may later reverse.
The platinum group metals also suffered heavy losses. Spot platinum crashed by 6.5% to $2,285.75 per ounce, while palladium traded 5.2% lower at $1,727.40 per ounce.
