Gold futures are experiencing a downward trend as better-than-expected U.S. jobs data strengthens U.S. Treasury yields and the dollar. This has dampened investor interest in gold and is setting prices on track for their first weekly loss in a month.
Weekly Loss in Gold Prices
Gold for December delivery (GC00, -1.32% GCG24, -1.32%) has fallen by $22.90, or 1.1%, bringing the price per ounce to $2,023.50 on Comex. The prices, which are based on the most-active contract, are looking to settle at their lowest point since November 27, according to FactSet data. This week has seen prices decrease by over 3%, marking their first weekly loss since the week that ended on November 10.
Positive U.S. Economic Report
The decline in gold prices follows the release of a U.S. economic report that indicates a favorable state of the country’s economy. Jim Wyckoff, senior analyst at Kitco.com, commented, “The report suggested the U.S. economy is presently in a pretty good spot.”
Strong Job Growth
In November, the number of new U.S. jobs created exceeded expectations, with an increase of 199,000 jobs compared to the forecasted gain of 190,000 by economists polled by The Wall Street Journal. Government data also revealed that the unemployment rate dropped to a four-month low of 3.7% from 3.9%. Additionally, average hourly earnings rose by a significant 0.4%, marking the largest increase in four months.
Varying Interpretations
Wyckoff stated, “The jobs report appears to fall very mildly into the camp of the U.S. monetary policy hawks, who want the Federal Reserve to continue its interest-rate-increasing cycle.” However, others view today’s jobs data as a ‘Goldilocks’ report that is neither too hot nor too cold for the general marketplace.
Consumer Sentiment on the Rise
In a separate development, the University of Michigan’s gauge of consumer sentiment inched up to a preliminary reading of 69.4 in December, which is the highest level since August. This is an improvement from November’s six-month low of 61.3.
Gold Reacts to Stronger Jobs Data and Consumer Sentiment
Gold prices experienced a typical response to the release of robust jobs and consumer sentiment data, resulting in a decline while the US dollar and yields rose. Fawad Razaqzada, a market analyst at City Index and FOREX.com, stated that the metal is still holding above the crucial short-term support of $2,000 and emphasized the necessity for it to maintain this level in order to sustain its recent bullish trend.
On Friday, the ICE U.S. Dollar index demonstrated a 0.5% increase, reaching 104.01, while the 10-year Treasury yield rose from 4.129% on Thursday afternoon to 4.245%. The decline in gold futures occurred shortly after prices hit their highest intraday level on record. The most-active contract saw prices reach an all-time high of $2,152.30 on Sunday evening, surpassing the previous highest daily finish of $2,089.20 set on December 1st.
With the release of the stronger data, market participants are now speculating whether there will be confirmation from the Federal Reserve regarding potential rate cuts at the end of Q1 or the beginning of Q2 next year. Razaqzada highlighted the upcoming CPI report on Tuesday as a determining factor for how hawkish or dovish the Fed will appear during their monetary policy meeting, scheduled to conclude on Wednesday. As a result, the focus of gold investors will turn towards this meeting in the coming week.
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