Gold Prices Dip Ahead of U.S. Payrolls Report, Fed in Focus

Gold Prices Retreated After Surge, As Market Preps for U.S. Payrolls

New York: Gold prices fell on Thursday as traders took profits after a major rally, and the focus of traders shifted to the U.S. Payrolls report which may deliver insights into the direction of specific Federal Reserve policies.

As of late morning EDT, spot gold fell 0.4% to $3,544.15 per ounce and U.S. gold futures dropped 0.9% to $3,603.70 per ounce. The retreat comes just one day after spot gold traded $3,578.50 per ounce, when very weak job opening numbers added to hopes for a forthcoming rate cut.

Traders also await Friday’s U.S. non-farm payrolls report that is likely to clarify expectations for the Fed’s next and future steps. The previous day’s data pointed to a larger-than-anticipated upturn in Americans that filed for unemployment benefits, adding to signs of weakness in the labor market.

“While the expectation of a Fed rate cut is largely priced in, the key focal point becomes the jobs report tomorrow. Any change can impact the dollar directly, which can influence gold prices,” said David Meger, director of metals trading for High Ridge Futures.

As several Federal Reserve officials have indicated in the past few weeks, concerns over the labor market support the argument that a rate cut may be coming sooner than later. According to CME Group’s FedWatch tool, the market is currently pricing in a 98% chance of a 25 basis-point cut this month.

Safe-Haven Demand Will Support Gold

Gold is a non-yielding asset that typically thrives in negative real interest rate environments and during times of uncertainty. Analysts from Standard Chartered expect more upside in gold prices and highlight persistent geopolitical uncertainty, trade war concerns, and questions of Fed independence as reasons for continued safe-haven demand.

Also in recent days, US President Donald Trump tried to fire Fed Governor Lisa Cook, which will stoke fears over the independence of central banks and increases demand for gold as a safe-haven asset.

International Gold Trends

In other news, Poland’s central bank will raise its target allocation for gold in its reserves from 20% to 30%, according to the Governor Adam Glapinski. Meanwhile, spot silver dipped 1.2% to $40.71 per ounce, after hitting its highest level since September 2011 on Wednesday.