Fundamental Overview
Gold prices are experiencing turbulence with a lack of clear direction, as traders hesitate to bet against the US Dollar (USD) ahead of crucial US employment data. The US Dollar is nursing wounds after a sharp decline, particularly against the Japanese Yen (JPY), where the USD/JPY pair hit a new 4-month low at 141.63. This surge in the Yen comes amidst hopes that the Bank of Japan (BoJ) might adjust its policy sooner than expected.
Despite the selloff in the US Dollar, gold prices are not benefiting due to the robust recovery of US Treasury bond yields from multi-month lows. The attractiveness of non-interest-bearing gold is diminishing as US bond yields gain strength. Markets are in the process of repositioning themselves regarding US government bonds and the US Dollar as they seek to secure profits ahead of the Federal Reserve's (Fed) interest rate decision next week.
Meanwhile, the highly anticipated US labor market data is poised to be scrutinized for fresh insights into the Fed's interest rate outlook. The market is pricing in a 60% chance of a rate cut in March, and the Non-Farm Payrolls (NFP) data is expected to show an addition of 180,000 jobs in November, compared to the previous 150,000, while wage inflation, measured by Average Hourly Earnings, is predicted to rise by 4.0% YoY in November.
Recent US labor market indicators, including ADP employment and JOLTS data, suggest that labor market conditions are easing. If the weak NFP print confirms this, expectations of a Fed rate cut may surge, potentially undermining the US Dollar and US Treasury bond yields. In such a scenario, Gold prices could sustainably reclaim the $2,050 barrier. Conversely, if the data significantly exceeds expectations, the market might use it as a reason to take profits ahead of the Fed's decision, and Gold price adjustments thereafter could continue towards the $2,000 mark.
Despite the selloff in the US Dollar, gold prices are not benefiting due to the robust recovery of US Treasury bond yields from multi-month lows. The attractiveness of non-interest-bearing gold is diminishing as US bond yields gain strength. Markets are in the process of repositioning themselves regarding US government bonds and the US Dollar as they seek to secure profits ahead of the Federal Reserve's (Fed) interest rate decision next week.
Meanwhile, the highly anticipated US labor market data is poised to be scrutinized for fresh insights into the Fed's interest rate outlook. The market is pricing in a 60% chance of a rate cut in March, and the Non-Farm Payrolls (NFP) data is expected to show an addition of 180,000 jobs in November, compared to the previous 150,000, while wage inflation, measured by Average Hourly Earnings, is predicted to rise by 4.0% YoY in November.
Recent US labor market indicators, including ADP employment and JOLTS data, suggest that labor market conditions are easing. If the weak NFP print confirms this, expectations of a Fed rate cut may surge, potentially undermining the US Dollar and US Treasury bond yields. In such a scenario, Gold prices could sustainably reclaim the $2,050 barrier. Conversely, if the data significantly exceeds expectations, the market might use it as a reason to take profits ahead of the Fed's decision, and Gold price adjustments thereafter could continue towards the $2,000 mark.
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