Gold prices edged back towards the $2,000 mark on Friday as traders scaled back bets on a US interest rate cut by March next year following a stronger-than-expected jobs report.
Spot gold fell 1.1% to $2,005.48 an ounce by 11:30 a.m. ET, its lowest level in almost two weeks. US gold futures were also down 1.3% at $2,019.80 an ounce in New York.
The decline follows the latest US employment report, which showed that job growth accelerated in November and the unemployment rate fell to 3.7%, suggesting that market expectations of an interest rate cut early next year may have been premature.
Meanwhile, the US Dollar Index firmed 0.2%, making gold more expensive for overseas buyers. In addition, 10-year Treasury yields edged higher.
“Gold has slumped as the US employment report showed strength across the board,” said Tai Wong, a New York-based independent metals trader, in a Reuters note.
“If gold closes today at new lows below $2,009, it would be a signal that the correction has further to run. If gold holds up well on a fairly strong payrolls number, it will give buyers confidence that we’ve seen at least a short-term bottom.”
Traders had previously priced in a 60% chance of the Fed starting to cut rates in March, but this has been reduced to just under 50% after the jobs data, with May now a more likely starting point.
Traders will be looking for further confirmation at the Fed’s meeting on 12-13 December.
“We expect short dips in the gold market, but see continued strength in demand, keeping the overall trend sideways to higher,” said David Meger, director of metals trading at High Ridge Futures.
On Thursday, the World Gold Council released its outlook for gold in 2024, highlighting monetary policy as one of the factors to watch next year, along with geopolitical risks and central bank buying.
