Gold Loses Shine as Rate Cut Hopes Fade

5 Feb 2024 , 10:45 AM

Monday saw a little decline in gold prices as the dollar and Treasury yields surged following a disastrous U.S. jobs report that crushed expectations of an early rate decrease by the Federal Reserve.

Spot gold dropped 0.1% to $2,036.96 an ounce.

The ounce of U.S. gold futures remained unchanged at $2,053.50.

The dollar index reached an eight-week high, pushing up the price of bullion for holders of other currencies, while the yield on the benchmark 10-year Treasury note increased to over 4%.

The U.S. Labour Department reported on Friday that nonfarm payrolls rose by 353,000 jobs in January, about twice as many as the 180,000 economists surveyed by Reuters had predicted.

Fed Chair Jerome Powell expressed confidence last week that inflation would return to the central bank’s 2% target but rejected the notion of cutting interest rates in the spring.

As to LSEG’s interest rate probability app IRPR, traders are wagering on five quarter-point Fed rate cuts for 2024, which is a decrease from six last Monday.

There is now a longer chance of a cut in May. The appeal of non-yielding gold is increased by lower interest rates because they lower the opportunity cost of storing metal.

Investors are expecting for more hints about rate cuts in the remarks made by a number of Fed speakers this week.

According to a private sector poll, China’s services industry grew at a somewhat slower rate in January as new orders decreased. This suggests a rocky start for the world’s second-biggest economy amid weak demand and a real estate drop.

According to data released on Friday, COMEX gold speculators reduced their net long position by 4,639 contracts to 71,976 in the week that ended on January 30.

Spot silver down by 0.3% to $22.61 an ounce, palladium decreased by 0.8% to $939.26, and platinum decreased by 0.3% to $893.69.

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