Gold's gains pause – what are the reasons?
Gold prices paused during Wednesday's trading, as the precious metal fell to trade near $4450 per ounce, after two-day gains, as it bounced from the psychological resistance level of $4500 per ounce, as investors shifted their focus from geopolitical tensions to the upcoming US economic data.
U.S. jobs data in focus
Investors are awaiting the release of the December U.S. jobs report on Friday, which is one of the most important indicators that the Federal Reserve relies on to determine the course of monetary policy in the coming period.
Any signs of a slowdown in the labor market would boost expectations for a cut in US interest rates, which supports gold prices as a non-return asset.
Signals from the Federal Reserve on interest rates
The Federal Open Market Committee (FOMC) member Neel Kashkari suggested that rising unemployment could increase the chances of the US Federal Reserve cutting interest rates in the coming period.
Markets are currently pricing in two potential rate cuts this year, limiting any potential losses for gold in the short term.
Geopolitical tensions remain supportive for gold
Despite price declines, geopolitical risks remain a major support for gold.
U.S. forces announced the arrest of Venezuelan President Nicolas Maduro, amid an escalation in Washington's rhetoric towards Venezuela.
U.S. President Donald Trump made it clear that his country could impose additional measures, including possible military action, if the interim Venezuelan leadership does not cooperate.
Global tensions escalate as uncertainty grows
The White House reported that Trump has not ruled out military action over Greenland, while relations between China and Japan became increasingly strained after Beijing imposed restrictions on exports of certain goods that could be used for military purposes.
Gold Price Outlook
We believe that the future trend of gold prices is bullish in the medium and long term, and now remains subject to the markets' reaction to the US economic data, especially the jobs report and inflation levels, as well as the Fed's monetary policy developments and continued geopolitical instability.
