Gold slips as dollar rises, traders retreat from expectations of a U.S. interest rate cut
On Thursday, precious metals markets witnessed a significant decline in gold prices, with an ounce approaching the $4060 level.
The main factors influencing gold's decline today were:
- The US dollar index rose to the highest level in more than two weeks, which increased the cost of buying gold for holders of other currencies, thus pressurizing demand and lowering prices.
- The latest readings from CME Group's FedWatch tool showed a drop in expectations for a rate cut, from 49% on Wednesday to just 33% on Thursday, following the release of the Fed's October meeting minutes.
Fed Minutes Signals
The minutes released on Wednesday revealed a clear divide among U.S. central bank policymakers on the necessity of cutting interest rates.
Officials vacillated between concerns about a weak labor market and continued inflation risks, and the minutes warned that a hasty rate cut could exacerbate inflation and risk a loss of public confidence in the central bank.
U.S. jobs report
The September nonfarm payrolls report, which was delayed due to the recent US government shutdown, is due later today.
The data is expected to provide important clues about the direction of the Federal Reserve's monetary policy.
The U.S. Bureau of Labor Statistics (BLS) announced that it will skip the usual October report and will combine the data with the November report, as the household survey data cannot be collected retrospectively.
Gold and interest rates
As a non-yielding asset, gold tends to perform well in a low interest rate environment and during periods of economic uncertainty, making it sensitive to changes in US monetary policy expectations.
Investors continue to closely monitor US economic data, especially on the labor market and inflation, to be able to anticipate the path of US monetary policy and its impact on precious metals markets.
