Gold prices rose in Asian trading on Wednesday, approaching a nearly seven-week high. The PMs traded above $4,300 amid a negative tone in the US labour market, which was weighing on the Dollar. To retail investors, that gain represents an increasing bet that US interest rates could further soften in the months ahead – something that frequently works to gold’s advantage.
Cooler US Jobs Data Boosts Gold Demand
Gold rose after recent US employment data suggested the job market was losing momentum. The economy added 64,000 jobs (Nonfarm Payrolls) in November, after a steep 105,000 loss in October, and well ahead of the consensus forecast of 50,000. But other details told a gentler story. The US unemployment rate rose to 4.6% from 4.4%, a level not seen since 2021. Meanwhile, average hourly earnings came in at a disappointing 0.1% on the month, well below October’s 0.4%.
Further to this, US retail sales stagnated in October, contrary to market expectations of a slight rise, suggesting consumer spending is slowing slightly. Taken together, the signals undermined support for the US Dollar. They made gold relatively more attractive because lower interest rates decrease the opportunity cost of holding non-interest-bearing assets such as bullion.
Fed Outlook, Inflation Data Still in Play
Already, the Federal Reserve has delivered three 25-basis-point rate cuts and is somewhat divided on what to do next. Even as the median projection signals only one rate cut next year, markets are still pricing in two. The likelihood that the Fed will keep rates steady at its January meeting increased to 75.6%, according to CME FedWatch data.
In the days ahead, traders will be keeping an eye on speeches from Fed officials, including New York Fed President John Williams and Atlanta Fed President Raphael Bostic. And the coming week’s data, including Thursday’s Consumer Price Index and Friday’s PCE Price Index, could continue to shape expectations.
On the technical side, gold is well supported above key moving averages, indicating the overall bullish bias remains in place.
