Gold Slightly Weakens Ahead of US NFP Data
Gold prices fell slightly in Friday's Asian trading session, after bouncing from the US$4,400 area in the previous session. Pressure arose because the US dollar remained strong over the past two weeks.
The strengthening dollar pushed gold lower by making it more expensive for buyers outside the US. The dollar index reportedly hit a near one-month high, curbing gold's gains.
However, gold's decline was likely limited as the market still sees the possibility of the Fed remaining dovish (leaning towards looser policy) this year. Expectations of interest rate cuts typically support gold, as gold is non-yielding.
The market's primary focus is now on tonight's US Nonfarm Payrolls (NFP) release. This employment data will provide important clues regarding the direction of the Fed's interest rate cuts, as well as triggering short-term movements in the dollar and gold prices.
Market projections indicate that US jobs added around 60,000 in December (lower than the previous month), while the unemployment rate is expected to fall to 4.5%. Therefore, investors are likely to hold large positions until the data is released.
On the other hand, geopolitical factors have the potential to prevent further declines in gold, as gold remains sought after as a safe haven. Uncertainty has increased following concerns about US involvement in Venezuela, the escalating China-Japan dispute over restrictions on strategic commodity exports, and the Russia-Ukraine war, which is considered far from over.
5 key points:
- Gold weakened slightly as the US dollar remained strong ahead of the NFP release.
- A stronger dollar pressured gold, but dovish Fed expectations limited declines.
- Tonight's NFP will determine the direction of the Fed's interest rate and the subsequent movement of gold.
- Projection: NFP around 60,000; unemployment expected to fall to 4.5%.
- Geopolitical risks (Venezuela, China-Japan, Russia-Ukraine) maintain safe-haven interest in gold. (asd)
Source: Trading Economics
