Gold prices exhibited minimal movement in Asian trade on Friday after slipping below crucial levels earlier in the week due to a substantial rebound in the dollar. The focus now turns to key U.S. labor market data to gain insights into potential interest rate cuts in 2024.
The yellow metal experienced some losses for the week following a robust surge towards the end of 2023. However, the rally faltered amid profit-taking activities and growing uncertainty surrounding the Federal Reserve’s plans for interest rate adjustments in the coming year.
Market sentiment tempered expectations for rate cuts as the minutes of the Fed‘s December meeting provided limited indications of the timeline for initiating rate reductions. This development prompted a strong upturn in the dollar, set to achieve a weekly gain of over 1%—its most significant increase since July 2023.
Spot gold saw a marginal increase of 0.1% to $2,045.41 per ounce, while gold futures rose by 0.1% to $2,052.05 per ounce by 23:25 ET (03:25 GMT). Both instruments recorded declines of 0.8% to 1% for the week.
Market Focus on Nonfarm Payrolls Data:
The market’s attention has shifted to the eagerly awaited nonfarm payrolls data for December, scheduled for release later on Friday. Analysts anticipate signs of cooling in the labor market, although traders remain cautious due to unexpected strength following better-than-anticipated weekly jobless claims and private payrolls data earlier in the week.
Key Factors Influencing Rate Cut Speculation:
A cooling labor market and subdued inflation are pivotal factors the Fed considers when contemplating rate cuts. Despite recent moderation in these aspects, traders remain uncertain about whether it will prompt aggressive monetary easing by the Fed.
According to the CME Fedwatch tool, traders have slightly reduced their bets on a 25 basis point cut in March 2024, shifting from a 72% chance a week ago to a 62% chance currently. This adjustment triggered notable gains in the dollar and contributed to some retracement in gold prices.
Outlook for Gold and Copper:
Despite the recent pullback, gold has maintained its strong performance from late 2023, consistently holding above the $2,000-an-ounce level for over a month. Easing interest rates are anticipated to support bullion prices in the coming year, as higher rates elevate the opportunity cost of investing in gold.
In contrast, copper prices faced weekly losses amid profit-taking after a rally at the end of 2023. Copper futures expiring in March declined by 0.1% to $3.8487 per pound, with a weekly decrease of approximately 1.1%. Weak purchasing managers index readings globally, indicating a sustained decline in manufacturing activity, and concerns over China’s economic recovery weighed on copper prices. China, as the largest copper importer globally, raised apprehensions about a slowdown in copper demand due to its sluggish economic recovery.
