Gold prices held steady after a recent decline, as investors await the crucial US nonfarm payrolls report. This key economic indicator could significantly influence the Federal Reserve’s upcoming interest rate decision.
The precious metal experienced a 0.7% dip on Thursday, its most substantial drop since November 25th, breaking from the tight trading range seen in the previous week. Market attention is now firmly fixed on the upcoming Friday release of the US nonfarm payrolls data. This report represents the final major economic data release before the Federal Reserve’s policy meeting scheduled for December 17-18th in Washington. Current market expectations, reflected in swaps markets, anticipate a 25 basis-point rate cut. However, a robust jobs report could potentially dissuade the central bank from pursuing more aggressive monetary easing measures in the coming year. Lower interest rates generally support gold prices, as they reduce the opportunity cost of holding non-interest-bearing assets like gold.
Since reaching a record high in late October, gold prices have retreated, influenced by a strengthening dollar following Donald Trump’s election victory and a de-escalation of tensions in the Middle East. Despite this recent pullback, gold prices remain up by over 25% year-to-date, buoyed by previous US rate cuts and continued central bank gold purchases.
Looking ahead, Macquarie Group Ltd. projects further upside potential for gold in the coming year, potentially leading to new record highs. This optimistic outlook is predicated on the Federal Reserve’s anticipated rate cuts and ongoing central bank gold acquisitions. Macquarie forecasts an average gold price of $2,650 per ounce in the first quarter of 2025.
As of 7:21 a.m. in Singapore, spot gold was trading near $2,632.73 an ounce, showing minimal movement and poised for a slight weekly decline. Other precious metals saw mixed performance, with silver and palladium edging higher, while platinum experienced a slight dip.
In conclusion, the upcoming US jobs report holds significant weight in determining the near-term trajectory of gold prices. A strong jobs number could temper the Federal Reserve’s inclination towards aggressive rate cuts, potentially putting downward pressure on gold. Conversely, weaker-than-expected jobs data could reinforce the case for further monetary easing, potentially providing support for gold prices. The market remains keenly focused on this key data release and its implications for the Federal Reserve’s policy decisions.
