Gold prices experienced a drop on Friday after nearing record highs earlier in the day. The decline came after the release of mixed U.S. jobs data, which left traders uncertain about the Federal Reserve’s next move regarding interest rates.
Spot gold fell 0.8% to $2,495.86 per ounce, retreating from its highest point since August. U.S. gold futures also settled 0.7% lower at $2,524.60.
The U.S. jobs data showed a modest rise in non-farm payrolls, with only 142,000 jobs added in August, compared to expectations of 160,000. In addition, July’s job numbers were revised down significantly to 89,000 from previous estimates.
Despite these figures, the unemployment rate slightly decreased to 4.2%, aligning with market expectations. However, this mixed jobs report has cast doubt on the scale of the Federal Reserve’s expected interest rate cuts later this month.
With the U.S. jobs data providing a less clear economic picture, market participants are speculating about the Fed’s next move. Some traders believe the central bank will opt for a 25-basis-point rate cut, while others are predicting a steeper 50-basis-point reduction.
According to the CME FedWatch tool, there is currently a 73% chance that the Fed will cut interest rates by 25 basis points and a 27% chance of a 50-basis-point cut.
This uncertainty around interest rates has caused fluctuations in the gold market. Lower interest rates generally make gold more attractive as they reduce the opportunity cost of holding the metal, which does not yield interest.
Aakash Doshi, head of commodities at Citi Research, noted that the precious metal is reacting to the ongoing debate about the size of the Fed’s rate cuts.
Fed officials have also weighed in on the situation. New York Fed President John Williams stated that lowering rates could help keep the job market balanced.
Meanwhile, Federal Reserve Governor Christopher Waller mentioned that “the time has come” for the central bank to begin a series of interest rate cuts. He remained open to both the size and pace of these reductions.
Despite the recent dip, some analysts believe gold prices could climb again in the near future. Suki Cooper, an analyst at Standard Chartered, expects the Fed to cut rates more steeply, which could provide upside risk for gold.
Cooper predicts that gold prices could reach $2,700 by the end of the year as the Federal Reserve’s actions unfold.
This recent drop in gold prices comes as part of a broader trend in the precious metals market. Alongside gold’s decline, spot silver fell 3.1% to $27.92, while platinum dropped 0.4% to $920.55. Palladium also took a significant hit, falling by a 3.1% to $913.00.
Final Remarks
As traders continue to analyze the U.S. jobs data and the Federal Reserve’s potential actions, the outlook for gold remains uncertain.
While gold prices fall in response to the mixed economic data, many will be watching closely to see how interest rate decisions impact the precious metal market in the coming months.
With the Federal Reserve set to make its move on September 18, the stage is set for potential shifts in both interest rates and gold prices.