Gold Wavers as Traders Mull Fed Rate Outlook After Jobs Data

Summary:

Gold fluctuated as traders reassessed Fed policy after mixed US jobs data. With a December rate cut still under 50% odds, higher-rate expectations pressured bullion, which eased after a strong year-long rally.

Gold wavered as traders mulled the Federal Reserve’s interest-rate path following a key US jobs report that showed a mixed labor market.

US job growth picked up in September, though the unemployment rate ticked higher. It will be the last jobs report the Fed sees before its Dec. 9-10 meeting, and officials are divided over whether the slowdown in the labor market justifies another rate cut then.

Given that the data showed job growth topping expectations, “there is no reason to think the Fed is going to be more aggressive on easing monetary policy,” said Bart Melek, global head of commodity strategy at TD Securities. “The market was already thinking a December cut is not a sure bet. The jobs data just confirms this.”

Prior to the print, swap traders had already priced out a rate reduction next month following the government’s cancellation of the October employment report. While slightly increasing their wagers of a December cut after the jobs report, the traders still see a less than 50% chance of a rate reduction next month. Bullion typically underperforms in a higher rate environment.

Gold has rallied strongly this year, gaining more than 50% and hitting a record in October before retracing some of its gains. The advance has been supported by two earlier rate cuts from the Fed, as well as elevated central-bank buying and inflows into bullion-backed exchange-traded funds.

Gold slipped 0.2% to 4,070.34 an ounce at 11:21 a.m. in New York. The Bloomberg Dollar Spot Index was flat. Silver, platinum and palladium all fell.

Source: Bloomberg

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