Gold prices fall as expectations for a significant U.S. interest rate cut weaken following the release of job market data.
Gold prices declined on Monday as stronger-than-expected U.S. jobs data diminished hopes for a significant interest-rate cut by the Federal Reserve. Despite ongoing tensions in the Middle East, which typically drive demand for safe-haven assets like gold, the precious metal was unable to hold its ground due to increasing U.S. Treasury yields.
The price of bullion fell by 0.5%, trading near $2,640 per ounce. This dip occurred as investors scaled back their expectations for a 50-basis-point interest-rate cut in November. The drop in gold prices was mainly influenced by Friday’s U.S. labour market report, which revealed that employers added more jobs in September than in any other month during the past six months. This data surpassed even the highest predictions, signalling a stronger economy and reducing the likelihood of drastic rate cuts. Typically, gold benefits from lower interest rates since it does not offer interest like bonds or other assets, making it less appealing in an environment of rising rates.
Meanwhile, Middle Eastern tensions continued to unfold, capturing the attention of investors who are also monitoring the region for any developments that could influence gold prices. Last week, Iran launched a missile attack, prompting concerns about further escalation. Israel responded over the weekend by re-entering the northern Gaza Strip to confront the Tehran-supported Hamas. Airstrikes were also ramped up in Beirut against Hezbollah, another group aligned with Iran. The conflict has raised geopolitical risks, which usually support demand for safe-haven assets like gold, but the influence of these tensions has not been enough to counteract the pressure from the U.S. jobs data.
Gold has been on an impressive rally this year, gaining more than 25% and reaching several record highs. Much of the metal’s gains have been driven by optimism surrounding potential Federal Reserve rate cuts, as well as strong purchases by official sectors and growing demand for haven assets. However, some momentum appears to be fading. China’s central bank, for instance, revealed on Monday that it had not increased its gold holdings, which further dampened market enthusiasm.
At the close of trading in Singapore, spot gold was down 0.4%, sitting at $2,642.93 per ounce. This was below the all-time high of $2,685.58 set in September. The Bloomberg Dollar Spot Index remained steady after rising 1.6% last week. Other precious metals also saw mixed results, with silver and platinum both declining, while palladium experienced a slight rise.
