Gold subdued as strong US jobs data temper Fed rate cut expectations

Gold prices inched lower on Monday following a steep fall in the previous session, as robust US jobs report dashed hopes of an aggressive interest rate cut by the Federal Reserve later this month. Spot gold was down 0.1 per cent at $1,398.75 per ounce as of 0118 GMT. Gold fell more than 1 per cent on Friday and also marked its first weekly decline in seven weeks.

US gold futures were up 0.1 per cent at $1,401 an ounce. “Today is just a spill over of what we saw on Friday after strong US jobs numbers. Despite the strong numbers, market is expecting rate cut just not as aggressive it would be but having said that we are still on rate easing cycle right now,” said Howie Lee, an economist at OCBC Bank.

“Additionally, $1,400 is pretty strong support level for gold. Also, we should not forget growth still remains weak globally and we have geo-political tension between US and Iran. Overall factors are still supportive for higher gold prices,” he added. US non-farm payrolls rebounded in June to 224,000, the most in five months, data showed on Friday, beating economists' consensus estimate of 160,000.

The dollar took heart from strong US jobs data and rose to more than two-week high, making gold more expensive for holders of other currencies. Expectations for a Fed rate cut narrowed with the market now pricing a 27 basis points easing this month, from 33 basis points prior to payrolls.

Fed Chairman Jerome Powell is expected to provide further cues on the near-term outlook for monetary policy this week at his semi-annual testimony to the US Congress on the economy. However, persistent moderate wage gains and mounting evidence the economy was losing momentum could still encourage Fed to cut interest rates this month.

Iran said on Sunday it will shortly boost its uranium enrichment above a cap set by a landmark 2015 nuclear deal, prompting a warning 'to be careful' from U.S. President Donald Trump, who has pressured Tehran to renegotiate the pact.

Meanwhile, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.18 per cent to 796.97 tonnes on Friday from 798.44 tonnes on Wednesday. On the technical front, spot gold may retest a resistance at $1,439 per ounce and as long as the metal stays above the support at $1,387, it may resume its uptrend towards $1,497, according to Reuters technical analyst Wang Tao.

Among other precious metals, silver rose 0.3 per cent to $15.02 per ounce, while palladium fell 0.1 per cent to $1,564.41. Platinum gained 0.9 per cent to $811.69, edging away from a more than one-week low touched in the previous session.

COMMENT NOW