Finance1 min read

Gold Extends Drop on Stronger-Than-Expected US Employment Data

By · Published by Everything Blog

In short

Bullion tumbled by as much as 1.5% after the latest employment figures prompted traders to price in a December Federal Reserve rate hike. The shift follows a volatile week where prices initially surged nearly 4% on midterm election results that hinted at lower government spending and an end to the Iran war. In response to these headwinds, Goldman Sachs lowered its year-end gold target from $4,650 to $4,150 an ounce. Other precious metals experienced mixed trading, with silver falling slightly to $51.76 an ounce while platinum managed to advance.

Key points

  • Strong U.S. labor data has solidified market expectations for a Federal Reserve interest…: Strong U.S. labor data has solidified market expectations for a Federal Reserve interest rate increase in December.
  • Rising borrowing costs continue to diminish the near-term appeal of non-yielding bullion…: Rising borrowing costs continue to diminish the near-term appeal of non-yielding bullion relative to the strengthening dollar.
  • Analysts view the current retreat in bullion prices as a potential entry window for longe…: Analysts view the current retreat in bullion prices as a potential entry window for longer-term macroeconomic hedgers.

Sources checked by our analysis pipeline: 1

Gold fell after a hot US nonfarm payrolls print added fuel to speculations that the Federal Reserve will seek to raise interest rates to contain inflation.

Bullion slipped as much as 1.5% toward $4,020 an ounce after the report. Traders also weighed diplomatic efforts to end the Middle East conflict against sharp losses in the artificial intelligence trade that have bruised risk appetite.

Traders have largely priced in a Fed rate hike in December, as stubbornly high energy prices complicate efforts to rein in inflation. Tighter monetary policy is a headwind for gold, which doesn’t pay interest.

For fast money funds looking into gold over the coming months, rising interest rates, highly uncertain energy prices and volatility around inflation are among factors that “make it difficult to maintain long positions,” analysts at Goldman Sachs Group Inc. wrote in a note, cutting their year-end forecast from $4,650 an ounce to $4,150 an ounce.

For longer-horizon investors looking to bet on the trend of central bank gold accumulation, or for protection against macro policy tail risks, “the current correction in gold prices…

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