Robust US labor market data took some of the shine off gold on Friday.
Gold prices on COMEX fell after the release of the US non-farm payroll data and the unemployment rate. However, prices have recovered somewhat, and are now in the green.
Gold prices have struggled throughout the day as positive labor market data from the US could prompt the Federal Reserve from cutting interest rates sharply.
Lower interest rates boost demand for gold as the precious metal is a non-yielding asset, unlike bonds.
At the time of writing, the price of COMEX gold was $2,686.50 per ounce, up 0.2% from the previous close.
Strong US labor market data dims gold’s appeal
The US Bureau of Labor Statistics’s non-farm payrolls report showed that the country added 254,000 new jobs in September.
This was higher than the upwardly revised 159,000 in August and above economists’ expectations of 140,000.
Meanwhile, the US unemployment rate fell to 4.1% in September, which was below the 4.2% recorded in August.
Additionally, average hourly earnings in the US rose 4.0% annually from a revised up 3.9% in August and was above expectations of 3.8%.
Potential Impact on Federal Reserve Decisions
A strong labor market may dissuade the Fed from cutting rates sharply, as indicated by Fxstreet.com. The positive labor market data from the US indicate that the economy is still resilient and in much better shape than previously anticipated.
This suggests the Fed may be less likely to implement a double-dose 50 basis points rate cut at the upcoming November meeting, following the recent interest rate cut at its September policy meeting.
Safe-haven demand supports gold prices
At a time when geopolitical tensions have escalated in the Middle East, safe-haven demand for assets such as gold has increased.
The world expects a response from Israel to Iran’s attack on Tuesday, which could potentially escalate tensions further.
Gold prices, initially in the red, were supported by prospects of escalating tensions in the Middle East, leading to a full recovery on Friday.
Furthermore, the overall trend lower in global interest rates contributes to gold’s attractiveness as a portfolio asset for investors.
Outlook for gold prices
According to ANZ Research, there is continued disinvestment in gold-backed exchange-traded funds alongside an increase in speculative positions.
The research firm highlights that lean levels of investment in gold could limit heavy liquidation and present opportunities for fresh buying.
Challenges in physical demand for gold, particularly due to high prices and fewer auspicious days for weddings in India and China, may require investment demand to remain strong.
Fxstreet’s editor Joaquin Monfort suggests that a break below $2,680 per ounce could lead COMEX gold prices to decline towards $2,625, with potential support at $2,600.
Alternatively, surpassing $2,673 per ounce could drive gold prices towards a record high of $2,700 per ounce.
Robust US labor market data took some of the shine off gold on Friday.
Gold prices on COMEX fell after the release of the US non-farm payroll data and the unemployment rate. However, prices have recovered somewhat, and are now in the green.
Gold prices have struggled throughout the day as positive labor market data from the US could prompt the Federal Reserve from cutting interest rates sharply.
Lower interest rates boost demand for gold as the precious metal is a non-yielding asset, unlike bonds.
At the time of writing, the price of COMEX gold was $2,686.50 per ounce, up 0.2% from the previous close.
Strong US labor market data dims gold’s appeal
The US Bureau of Labor Statistics’s non-farm payrolls report showed that the country added 254,000 new jobs in September.
This was higher than the upwardly revised 159,000 in August and above economists’ expectations of 140,000.
Meanwhile, the US unemployment rate fell to 4.1% in September, which was below the 4.2% recorded in August.
Additionally, average hourly earnings in the US rose 4.0% annually from a revised up 3.9% in August and was above expectations of 3.8%.
Potential Impact on Federal Reserve Decisions
A strong labor market may dissuade the Fed from cutting rates sharply, as indicated by Fxstreet.com. The positive labor market data from the US indicate that the economy is still resilient and in much better shape than previously anticipated.
This suggests the Fed may be less likely to implement a double-dose 50 basis points rate cut at the upcoming November meeting, following the recent interest rate cut at its September policy meeting.
Safe-haven demand supports gold prices
At a time when geopolitical tensions have escalated in the Middle East, safe-haven demand for assets such as gold has increased.
The world expects a response from Israel to Iran’s attack on Tuesday, which could potentially escalate tensions further.
Gold prices, initially in the red, were supported by prospects of escalating tensions in the Middle East, leading to a full recovery on Friday.
Furthermore, the overall trend lower in global interest rates contributes to gold’s attractiveness as a portfolio asset for investors.
Outlook for gold prices
According to ANZ Research, there is continued disinvestment in gold-backed exchange-traded funds alongside an increase in speculative positions.
The research firm highlights that lean levels of investment in gold could limit heavy liquidation and present opportunities for fresh buying.
Challenges in physical demand for gold, particularly due to high prices and fewer auspicious days for weddings in India and China, may require investment demand to remain strong.
Fxstreet’s editor Joaquin Monfort suggests that a break below $2,680 per ounce could lead COMEX gold prices to decline towards $2,625, with potential support at $2,600.
Alternatively, surpassing $2,673 per ounce could drive gold prices towards a record high of $2,700 per ounce.
